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 excellent liquidity. Offsetting factors in the balance sheet strength assessment include elevated exposure to investments in UAE equities, which increases the potential for capital volatility, and a high reinsurance dependence, with a premium retention ratio ranging between 25% and 30% since 2017. The credit risk associated with this reinsurance dependence is mitigated partially by the use of a diversified reinsurance panel of sound financial strength.

ADIC has a track record of strong operating performance as demonstrated by its five-year (2016-2020) weighted average combined ratio and return-on-equity ratio of 73.7% and 14.7%, respectively (both as calculated by AM Best). The company's underwriting performance has seen a level of volatility in the past, with its combined ratio peaking at 140.1% in 2015 following significant reserve strengthening in its medical portfolio. Subsequently, management has taken a series of actions to enhance underwriting performance including portfolio rationalisation and increased usage of reinsurance coverages. As a result, ADIC's technical profitability has strengthened, and in 2020 ADIC reported a combined ratio of 57.3%, the third consecutive year the company has achieved a combined ratio lower than 60%.

AM Best's views ADIC's business profile as limited, reflective of its market position as a mid-tier insurer in the UAE. ADIC wrote AED 289.8 million of premium in 2020 on a gross basis (2019: AED 323.8 million). AM Best considers the company to have a high level geographic concentration with respect to the competitive UAE market. While ADIC benefits from a diversified underwriting profile on a gross basis, the company's retained portfolio has an increased concentration to motor and medical lines of business.

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.

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