A.M. Best affirms Abu Dhabi National Takaful Company at A-
A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Abu Dhabi National Takaful Company (ADNTC) (United Arab Emirates). The outlook of these credit ratings (ratings) is stable.
The ratings reflect ADNTC’s very strong risk-adjusted capitalisation, in addition to its excellent technical and operating performance. An offsetting rating factor is the company’s concentration in the UAE.
A.M. Best considers the regulatory environment in the UAE to be sufficiently strong, given the protection it provides to policyholders. Therefore, ADNTC’s risk-adjusted capitalisation is assessed on a combined basis (integrating policyholders’ and shareholders’ funds). The company’s very strong capital position benefits from a low risk investment portfolio, with approximately 69 per cent held in cash and short term deposits, and low underwriting leverage. The high level of short term investments also ensures an exceptional liquidity position, with the ratio of liquid assets to net technical reserves at 352 per cent, at year-end 2016. A.M. Best anticipates risk-adjusted capitalisation will remain sufficiently strong to support prospective strategic initiatives, as a result of the ADNTC’s strong internal capital generation and modest dividend policy.
ADNTC has an exceptional track record of technical profitability, highlighted by its five-year average combined ratio of 69 per cent, (66 per cent in 2016). During 2016, the company produced an excellent return on equity of 17.4 per cent, with the majority of the company’s earnings attributed to technical income. Whilst investment return remains modest at approximately 2.5 per cent in 2016, the company’s conservative investment portfolio has mitigated volatility from movements in the local stock market over the past three years. A.M. Best expects the company’s strong operating performance to continue, given its effective underwriting controls and experienced management team. As at 30 June 2017, net profit is up 13 per cent to AED 34.2 million, compared to the same period in 2016.
Furthermore, ADNTC has accumulated a surplus of AED 5.8 million in the policyholders’ fund.
The company has a modest profile in the UAE insurance market, occupying a market share of less than two per cent. Nevertheless, ADNTC benefits from a good reputation, as one of the most successful Takaful companies in the market. The underwriting portfolio is well-diversified by line of business, however, remains focused on family Takaful and medical business, which is partly driven by its strong relationships with local banks. ADNTC reported growth of eight per cent in 2016, with gross written contributions climbing to AED 321 million ($87 million).