AM Best upgrades DIC

Rating agency AM Best has upgraded the issuer credit rating and outlook for the Dubai Insurance Company (DIC) following the insurer’s strong operating results and risk-adjusted capitalisation.

DIC’s issuer credit rating has been upgraded to “bbb+” from “bbb” and the financial strength rating (FSR) of B++ (Good) affirmed. The outlook for the ICR has also been revised to stable from positive, while the outlook for the FSR remains stable.

Other factors for the upgrade include its good franchise within the UAE, developing enterprise risk management (ERM) framework and sound reinsurance protection. An offsetting factor is DIC’s concentrated investment profile.

According to AM Best, the insurer has achieved an excellent five-year weighted average combined ratio of 76 percent while operating in the highly competitive UAE market with all lines of business producing a technical profit in 2013. Return on equity over the same period has averaged 8.9 percent with underwriting performance driving profitability.

Risk-adjusted capitalisation remains strong in 2014, with DIC’s capital position boosted by an AED114 million ($31 million) unrealised fair value gain on equity investments. The company’s level of risk-adjusted capitalisation is supported by low underwriting leverage and sound reinsurance protection.

AM Best says that DIC is well positioned at its current rating level and has demonstrated continued enhancement of its risk management framework, developing the use of a capital model and performing stress-testing on its business plans. However, its concentrated investment profile, which has material exposure to UAE financial sector equities, creates volatility in risk-adjusted capitalisation.