AM Best Affirms Credit Ratings of Dubai National Insurance & Reinsurance PSC

LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” (Good) of Dubai National Insurance & Reinsurance P.S.C. (DNI) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is positive.

The ratings reflect DNI’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

The positive outlooks reflect AM Best’s expectation that DNI’s balance sheet will continue to strengthen over the medium term, supported by the normalisation of dividend payments, allowing surplus growth through earnings retention, and further de-risking of the investment portfolio.

DNI’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation at the strongest level. The buffer held by DNI over the threshold for the strongest Best’s Capital Adequacy Ratio (BCAR) assessment strengthened in 2020, and is expected to be maintained at least at this level prospectively. Although DNI has taken actions to reduce investment risk, decreasing the weight of equity holdings in favour of fixed-income securities, the company’s balance sheet remains exposed to potential volatility from fluctuations in the value of its equity investments.

The assessment of balance sheet strength also reflects the company’s low net underwriting leverage, sufficient liquidity and history of prudent reserving practices, which incorporate a buffer over the actuarial best estimate. The counterparty credit risk associated with the company’s high dependence on reinsurance is mitigated partially by the use of a panel of financially sound reinsurers.

DNI has a track record of strong operating performance, as demonstrated by a five-year (2016-2020) weighted average return-on-equity of 9.3%. The balance of earnings remains skewed toward investment income, which accounted for over half of the company’s net profit in 2020. DNI’s underwriting results have been strong and stable, demonstrated by a five-year (2016-2020) weighted average non-life combined ratio of 84.5%. In 2020, DNI reported a non-life underwriting profit of AED 22.8 million, equating to a combined ratio of 80.4%. Although high levels of competition persist in the UAE insurance market, AM Best expects DNI to maintain its strong operating performance metrics through stringent underwriting controls and prudent risk selection.

DNI’s business profile assessment reflects its position as a mid-tier insurer in the UAE general insurance market. The company continues to focus on maintaining underwriting profitability in an increasingly competitive market. Following a change in management in early 2021, DNI has engaged in broadening its distribution platforms and entered strategic partnerships to source underwriting growth.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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