HONG KONG–(BUSINESS WIRE)–AM Best affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer’s long-term credit rating of “a-” (Excellent) of DTRIC Insurance Company, Limited (DTRIC) and its reinsured subsidiary , DTRIC Insurance Underwriters, Limited. The outlook for 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 management of business risks. The ratings also take into account 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 rated in the Financial category Size category of XV ($2 billion or more).
AM Best’s assessment that DTRIC’s balance sheet strength is strong is well supported by its highest level of risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR). While this valuation also reflects the company’s strong liquidity, moderately conservative investment strategy and good quality reinsurance panel, the company’s moderate dependence on reinsurance and its net exposure to potential losses due to natural disasters continue to be the main offsetting factors in the assessment.
In terms of operating performance, the company recorded an underwriting loss of $1.1 million in fiscal 2021. DTRIC’s underwritten premium also remained under pressure in fiscal 2021 due to the loss of some business accounts and the slower than expected economic recovery in Hawaii. Nonetheless, DTRIC continued to generate positive net income, supported by the company’s continued positive and stable investment income. The company is implementing an IT system upgrade, which AM Best says will weigh on its underwriting spend and performance over the next few years.
DTRIC primarily specializes in the underwriting of personal auto insurance, workers’ compensation, and a number of other commercial products in Hawaii, where the company has an overall market share of approximately 2%. Although there is no significant concentration in its product line, its narrow geographic focus is a major factor that limited the assessment of DTRIC’s business profile.
The stable outlook reflects AM Best’s expectation that DTRIC will maintain its overall assessment of balance sheet strength, supported by risk-adjusted capitalization at least at a high level, as measured by BCAR. AM Best also expects the ongoing strategic initiatives implemented by management to maintain a positive momentum in its operating performance in the short to medium term.
Negative rating actions could arise in the event of a material deterioration in DTRIC’s risk-adjusted capitalization caused by large-scale natural disasters or if its profitability falls below AM Best’s expectations due to competitive pressure, adverse experience with claims or overspending. Negative rating actions could also occur in the event of a material reduction in ADI’s support or a material deterioration in ADI’s credit profile, including its risk-adjusted capitalization, leverage or interest coverage levels.
Ratings are communicated to rated entities before publication. Unless otherwise indicated, the ratings have not been changed as a result of this communication.
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