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FOR IMMEDIATE RELEASE
HONG KONG - MAY 23, 2019 01:51 PM (EDT)
AM Best has affirmed the Financial Strength Rating (FSR) 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 AM Best categorizes 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 by Aioi Nissay Dowa Insurance Company Limited, a member of MS&AD Insurance Group Holdings, Inc., to DTRIC. Aioi Nissay Dowa Insurance Company Limited has an FSR of A+ (Superior) and is a Financial Class Size XV ($2 billion or greater).
DTRIC’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains at a strong level, underpinned by moderate underwriting leverage and an investment portfolio that is concentrated largely on low-risk and liquid assets. However, under the company’s current reinsurance program, its net exposure to a potential loss from catastrophes remains a significant risk factor. This risk has placed 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 peers’ averages. This is underpinned by its history of weak underwriting results as demonstrated by a five-year average combined ratio of approximately 104%. In response, DTRIC has implemented various measures to remediate the performance of its underwriting portfolio. AM Best notes that company also has taken initiatives to mitigate the potential impact arising from recent tax reforms.
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 specializes in workers’ compensation, personal automobile insurance and a number of other commercial line products. There is no significant concentration in its product mix, but the company’s narrow geographic focus is a major factor that has constrained its business profile assessment.
The stable outlooks reflect AM Best’s expectation that DTRIC will maintain positive operating results over the short to medium term, supported by stable revenue growth and a combined ratio that is expected to improve 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 AM Best’s expectation due to competitive pressure 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 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.
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