A.M. Best upgrades Credit Ratings of Dubai Insurance Company (PSC)
A.M. Best has upgraded the Financial Strength Rating to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating to “a-” from “bbb+” of Dubai Insurance Company (PSC) (DIC) (United Arab Emirates).
The outlooks of these Credit Ratings have been revised to stable from positive.
The rating upgrades reflect DIC’s consistently excellent technical performance, very strong risk-adjusted capitalisation and improving enterprise risk management (ERM). Partly offsetting rating factor are the company’s modest business profile in its domestic market and its concentrated investment profile weighted toward equities.
DIC has a track record of excellent technical performance. The company reported a technical profit of AED 23.9 million ($6.5 million) in 2016, compared with AED 23.4 million ($6.4 million) in 2015. DIC’s underwriting operations, including medical business, generated an exceptional five-year average combined ratio of 77.9 per cent (2012-2016). In addition, the company has reported an improved technical profit of AED 9.6 million ($2.61 million) for the first three months of 2017, compared with AED 9.4 million ($2.56 million) for the same period in 2016. DIC has maintained excellent underwriting performance despite prevailing competitive market conditions in the United Arab Emirates, with significant pressure on premium rates across most lines of business. A.M. Best expects DIC’s prudent approach to risk selection and focus on profitability over top-line growth to support strong future technical performance.
The company’s risk-adjusted capitalisation remained at a very strong level in 2016. Whilst DIC has a concentrated investment portfolio, with movements in the fair value of its equity holdings creating volatility in capital and surplus, the company maintains an adequate capital buffer to absorb these fluctuations. Prospective risk-adjusted capitalisation is expected to remain very strong, supported by good internal capital generation and controlled underwriting growth.
DIC’s approach to ERM has improved notably in recent years. The company has strengthened its identification and quantification of key risks and imposed greater controls to mitigate and reduce the potential impact on earnings and risk-adjusted capitalisation. DIC has a strong understanding of capital management and performs stress testing exercises to assess the impact of underwriting and investment risks on its balance sheet.
The company’s gross written premiums surpassed AED 400.0 million ($108 million) in 2016, ranking the company as a mid-tier player within the UAE insurance market. DIC’s franchise continues to benefit from access to business through its shareholders and affiliated companies. Nonetheless, on a net basis the company’s profile remains small, reflective of the low level of retention on property and marine lines of business.