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FOR IMMEDIATE RELEASE
HONG KONG - MAY 24, 2018 11:40 AM (EDT)
A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” 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 A.M. Best categorizes as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider the implicit and explicit support of Aioi Nissay Dowa Insurance Company Limited, a member of MS&AD Insurance Group Holdings, Inc. Aioi Nissay Dowa Insurance Company Limited has a Financial Strength Rating of A+ (Superior) and is a Financial Class Size XV ($2 billion or greater).
DTRIC’s strong balance sheet assessment mainly reflects its moderate underwriting leverage. In addition, the company’s investment portfolio continues to be invested mostly in low-risk and liquid assets. Based on DTRIC’s current capital size and reinsurance program, the net catastrophe exposure, particularly at the 99.6% value at risk level, is a significant risk factor. This risk has resulted in some strain on the company’s balance sheet assessment.
DTRIC’s operating performance on a five-year average basis is marginal, with key operating metrics lagging its peer averages. This is underpinned by its history of weak underwriting results, as demonstrated by the five-year average combined ratio of approximately 107%. In response, DTRIC has implemented various measures to remediate the performance of its underwriting portfolio; these include exiting a number of its unprofitable business lines, repricing its in-force portfolio and launching more profitable products. The company’s 2017 results indicate significant progress toward achieving underwriting profitability.
DTRIC is a general insurer that operates only in Hawaii. As a relatively small local insurer, the company holds an overall market share of less than 3%. DTRIC mainly focuses in workers’ compensation, personal automobile insurance and a number of other commercial lines products. There is no significant concentration in its product mix, but the company’s narrow geographic focus is the major factor that has constrained its business profile assessment.
Similar to other relatively small general insurers that specialize in one market, DTRIC’s risk profile shows high business concentration risk. Nevertheless, A.M. Best considers the company’s risk management capabilities to be aligned appropriately with its risk profile. This is supported mainly by its strong focus on improving its underwriting and pricing, as well as various initiatives to increase business volumes in a profitable manner.
The stable outlooks reflect A.M. Best’s expectation that DTRIC will maintain positive operating results, supported by stable revenue growth, with a combined ratio that is expected to decline gradually over time.
While positive rating actions are unlikely in the near term, negative rating actions could occur if there is significant deterioration in DTRIC’s risk-adjusted capitalization due to unexpected capital repatriation, or if its profitability falls below A.M. Best’s expectation due to competitive pressures or adverse claims experience.
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 A.M. 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 A.M. 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 A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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