HONG KONG–(BUSINESS WIRE)–#insurance—AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” (Excellent) of DTRIC Insurance Company, Limited (DTRIC), and its reinsured affiliate, DTRIC Insurance Underwriters, Limited. The outlook of these Credit Ratings (ratings) is stable. Both companies are domiciled in Honolulu, HI.
The ratings reflect DTRIC’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider the impact of implicit and explicit support given to DTRIC by Aioi Nissay Dowa Insurance Company Limited (ADI), a member of MS&AD Insurance Group Holdings, Inc. ADI has an FSR of A+ (Superior) and is classified under the Financial Size Category of XV ($2 billion or greater).
AM Best’s assessment of DTRIC’s balance sheet strength as strong continued to be supported by its strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). While this assessment also reflects the company’s favourable liquidity, moderately conservative investment strategy, and good quality reinsurance panel, the key offsetting factors continue to be the company’s relatively moderate dependency on reinsurance, its net exposure to potential losses from natural catastrophes, and its relatively small capital.
In terms of operating performance, the company recorded an underwriting loss of USD 13.2 million in fiscal year 2022 (FY2022), attributable to a number of adverse factors including a series of fire losses, costs arising from reinsurance reinstatement, and reserve increases for general liability amid rising inflation. DTRIC’s written premium gradually recovered from the impact of the COVID-19 pandemic in FY2022, although more slowly than expected. In addition, the company is implementing an information technology system upgrade, which AM Best expects to weigh on its underwriting expenses and performance over the next few years.
DTRIC mainly specialises in underwriting personal automobile insurance, workers’ compensation and a number of other commercial line products in Hawaii, where the company holds an overall market share of approximately 2%. There is no significant concentration in its product mix, and its narrow geographic focus is a major factor that has constrained DTRIC’s business profile assessment.
The stable outlooks reflect AM Best’s expectation that DTRIC will maintain its overall balance sheet strength assessment of strong, supported by risk-adjusted capitalisation at least at a strong level, as measured by BCAR. AM Best also expects that ongoing strategic initiatives implemented by management are likely to maintain positive momentum of its operating performance over the short to medium term.
Negative rating actions could occur if there is material deterioration in DTRIC’s risk-adjusted capitalisation caused by large-scale natural catastrophes or if its profitability falls below AM Best’s expectations due to competitive pressure, adverse claims experience or over-run expenses. Negative rating actions could also occur if there is significant reduction of support from ADI or significant deterioration in ADI’s credit profile, including its risk-adjusted capitalisation, financial leverage or interest coverage levels.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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