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FOR IMMEDIATE RELEASE
LONDON - NOVEMBER 02, 2022 01:24 PM (EDT)
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Abu Dhabi National Takaful Company P.S.C. (ADNTC) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect ADNTC’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.
AM Best considers the takaful regulations in the UAE to be sufficiently strong, given the protection it provides to policyholders. ADNTC’s risk-adjusted capitalisation is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR) on a combined policyholder and shareholder fund basis. AM Best expects the company’s prospective risk-adjusted capitalisation to remain sufficient to support its strategic plans, including the recently announced proposed acquisition of a portfolio of unit-linked life insurance business from Dubai Islamic Insurance & Reinsurance Company (Aman) P.J.S.C., which remains subject to regulatory approval. ADNTC has a generally conservative investment strategy, with over 50% of invested assets held in cash and deposits as at year-end 2021. Since 2020, the company has increased its weighting to higher-risk equity and real estate assets, to utilise surplus capital and strengthen investment yields. An offsetting factor in ADNTC’s balance sheet strength assessment is its high dependence on reinsurance, which increased following changes to its reinsurance structure for its family takaful (life) business in 2020. However, the associated credit risk is managed through the use of a reinsurance panel of sound financial strength.
ADNTC has a track record of strong operating performance with a five-year (2017-2021) weighted average return-on-equity ratio of 17.3%. The company has a history of strong underwriting performance within both its general and family takaful portfolios. Following challenging operating conditions in the UAE and structural changes made by ADNTC, which particularly affected the company’s family (life) takaful business, underwriting returns contracted for a second consecutive year in 2021. The company returned a technical result of AED 12.3 million (USD 3.4 million) in 2021, compared with AED 15.2 million (USD 4.1 million) in 2020, and AED 70.3 million (USD 19.1 million) in 2019 (as calculated by AM Best). Management actions implemented since 2020, including the restructuring of the family takaful reinsurance programme and strategic diversification of the underwriting portfolio, are expected to contribute toward the maintenance of strong underwriting performance over the coming years.
The company has a niche and established position in the UAE insurance market as a successful takaful operator, which is supported by strong and established distribution channels. After several years of strong annualised top-line growth, the company experienced two years of contraction in gross written contributions in 2020 and 2021. The effect was more pronounced on the company’s family takaful portfolio than on its general takaful portfolio, with the former more sensitive to macroeconomic conditions and subject to significant product changes in recent years.
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 Performance Assessments, 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.