AM Best Affirms Dubai National's A- Credit Rating
Dubai National Insurance & Reinsurance maintains its strong credit rating, reflecting robust financial health and strategic risk management.
Summary
AM Best has affirmed the A- credit rating of Dubai National Insurance & Reinsurance, highlighting its strong balance sheet and operating performance.
In a recent announcement, AM Best affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of 'a-' (Excellent) for Dubai National Insurance & Reinsurance P.S.C. (DNI), headquartered in the United Arab Emirates. The outlook remains stable, underscoring the company's robust balance sheet, strong operating performance, and strategic enterprise risk management.
DNI's balance sheet strength is particularly noteworthy, characterized by risk-adjusted capitalization at the highest level, as measured by AM Best's Capital Adequacy Ratio (BCAR). This strength is bolstered by effective earnings retention over the years, ensuring a solid buffer above the minimum required for the strongest BCAR assessment. The company's low underwriting leverage further enhances this robust financial position.
Despite these strengths, DNI's high dependence on reinsurance, with a retention ratio averaging 35% over the past five years, presents a potential risk. However, this is mitigated by the company's strategic partnerships with a panel of international reinsurers of excellent financial standing, thus partially offsetting the associated counterparty credit risk.
Operationally, DNI has demonstrated a consistent track record of strong performance. In 2023, under the IFRS 17 framework, the company achieved a return on equity of 6.7% and a net combined ratio of 94.1%, as calculated by AM Best. While investment income played a significant role in the company's net profit, recent technical profitability has faced challenges due to adverse underwriting conditions.
Given the current financial landscape and the company's strategic positioning, potential investors might consider a 'hold' strategy. While the affirmed ratings and stable outlook reflect a solid foundation, the high dependence on reinsurance and challenging underwriting conditions suggest a cautious approach. Monitoring DNI's ability to navigate these challenges and capitalize on its strengths will be crucial for future investment decisions.
Source
Summary
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" (Excellent) for Dubai National Insurance & Reinsurance P.S.C. (DNI) in the UAE, with a stable outlook. These ratings reflect DNI's very strong balance sheet, strong operating performance, limited business profile, and appropriate enterprise risk management. The company's balance sheet strength is supported by strong risk-adjusted capitalization, good earnings retention, low underwriting leverage, good liquidity levels, and prudent reserving practices. However, DNI's high dependence on reinsurance, with a retention ratio averaging 35% over the last five years, is noted as a rating offset. This risk is partly mitigated by using a panel of financially strong international reinsurers. In 2023, DNI achieved a return on equity of 6.7% and a net combined ratio of 94.1%, with investment income contributing significantly to net profit. Recent technical profitability has faced challenges due to difficult underwriting conditions.
