LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Al Dhafra Insurance Company P.S.C. (ADIC) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect ADIC’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.
ADIC’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), a history of good internal capital generation and strong liquidity. Offsetting factors in the balance sheet strength assessment include ADIC’s investment concentration toward domestic equities and its high reinsurance dependence with an average insurance revenue retention below 30% over the past two years. The credit risk associated with this dependence is mitigated partially by the use of a well-diversified reinsurance panel of sound financial strength.
ADIC has a track record of strong operating performance, demonstrated by a five-year (2019-2023) weighted average return on equity of 10.9%, as calculated by AM Best. However, from 2021, in line with peers in the UAE, ADIC suffered a marked decline in its technical profitability due to significant competition and pricing pressures. Following corrective actions taken by management, ADIC’s technical performance has started to return to historical averages as evidenced by a net-net combined ratio of 86%, as calculated by AM Best, reported for the first three quarters of 2024. Underwriting results are supported by modest, albeit stable investment returns.
ADIC’s business profile is considered to be supportive of a limited assessment. The company is a mid-tier insurer in the UAE, with gross insurance revenue of AED 320.6 million (USD 87.4 million) for the year-ended 31 December 2023. The company’s underwriting portfolio is concentrated geographically in the highly competitive UAE market. While ADIC benefits from a diversified underwriting portfolio by line of business on a gross basis, its retained portfolio has concentration in the motor and medical lines of business.
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