ADNTC rating affirmed

dubai — International ratings agency AM Best has downgraded outlook of Emirates Retakaful and affirmed the rating of Abu Dhabi National Takaful Company’s (ADNTC).

Emirates Retakaful’s outlook for long-term issuer credit rating has been revised from positive to negative and outlook for the financial strength rating has also been revised down to stable from positive. However, financial strength rating has been affirmed at B++ and longterm issuer credit rating at bbb+.

The outlook has been revised down following $36 million writeoff from gross written contributions for last year, reflecting significantly reduced contributions received compared to book estimates, the majority of which relates to prior underwriting years.

The company’s operating performance is considered to be weak, reporting net losses of $18 million in 2016, and $4 million in 2015. Although the company has sustained unrealised losses on its investment portfolio over the past two years, the primary driver of poor earnings has been the underwriting performance.

In addition, the impact of management actions taken to ensure adequate estimation of pipeline contributions are likely to take time to translate into reduced topline volatility, leaving the company exposed to occurrence of further revenue write-offs in the short-term, AM Best said in a statement. Despite the write-off, the company, however, maintains a strong capital positions, it said.

S&P Ratings said earlier this month that overall premium growth in conventional insurance will fare better than the Islamic insurance (takaful) segment this year by about 10 per cent.

Emir Mujkic, associate director for insurance ratings at S&P Global Ratings, maintained that operating performance remains one of the key issues in the takaful sector in the UAE because companies often write less-profitable personal lines and their premium income is too small to dilute their fixed operating costs.

AM Best affirmed the financial strength rating of A- and the longterm issuer credit rating of a- of Abu Dhabi National Takaful Company with stable outlook. The ratings reflect ADNTC’s very strong risk-adjusted capitalisation, in addition to its excellent technical and operating performance.

The company has a modest profile in the UAE insurance market, occupying a market share of less than two per cent.