Best’s News & Research Service - November 22, 2019 09:40 AM (EST)
AM Best Assigns Credit Ratings to Dhipaya Insurance Public Company Limited
- November 22, 2019 09:40 AM (EST)
Singapore //BestWire// - AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to Dhipaya Insurance Public Company Limited (Dhipaya) (Thailand). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Dhipaya’s balance sheet strength, which AM Best categorizes as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is very strong and supported by the company’s prudent investment management, high liquidity level and strong internal capital generation. In addition, the company’s regulatory capital adequacy ratio has remained well above the required level for a number of years. Nevertheless, an offsetting factor to the balance sheet strength assessment is the company’s heavy reinsurance dependence. Although the majority of the associated credit risks are mitigated through use of a diversified panel of reinsurance counterparties of good credit quality, the company is subject to periodic moderate write-downs of recoverables related to lower-rated reinsurers.
Dhipaya’s profitability has outperformed the industry benchmarks by a wide margin for five years. Throughout this period, the company achieved a favorable average combined ratio and operating ratio of approximately 80% and 70%, respectively. These robust results have been supported by strong underwriting performance and stable streams of investment income. One of the most important contributors to the company’s profits is its large and favorable business volume referred or distributed by major shareholders. Over the past several years, Dhipaya has reduced its product risk further by shortening the duration of long-term personal accident policies from nine years down to three to five years on average. AM Best expects shorter duration products to provide potential opportunities for better results through pricing flexibility.
The company has established a strong presence in Thailand’s non-life market, ranking second with a market share of 9% in 2018 in terms of direct premium written. In addition, Dhipaya has held a dominant market position in several major segments such as personal accident, fire and industrial risks. Nevertheless, due to a low risk appetite, the company has a limited presence in the market’s biggest sector - motor insurance, which generated 59% of Thailand’s insurance premium in 2018.
AM Best views Dhipaya’s risk management capabilities as appropriate relative to the profile of the key risks. The company has developed an ERM framework with proper risk identification and monitoring tools in place. In addition, the company has set up risk appetite and risk tolerance for key financial metrics and has kept the risk results within acceptable levels.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.