Ratings reflect ADNTC’s balance sheet strength, which AM Best categorizes 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. Consequently, ADNTC’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, is at the strongest level, on a combined basis, and AM Best expects prospective capitalization to be sufficient to support the company’s business plans. An offsetting factor in AM Best’s balance sheet assessment is ADNTC’s moderate reliance on reinsurance. However, the credit risk is mitigated by the company’s reinsurance panel, which is considered to be of good credit quality. Whilst the company’s asset base is concentrated in the UAE, it holds a low-risk investment portfolio that is considered highly liquid.
ADNTC has exhibited strong and consistent operating performance despite highly competitive market conditions, as evidenced by its five-year (2015-2019) average combined ratio of 66.2% and return on equity of 17.7%. Technical performance improved for the third consecutive year in 2019, with the company generating a combined ratio of 61.9% (as calculated by AM Best). The family takaful portfolio continues to be the main contributor to technical results. AM Best expects earnings to remain robust prospectively, although top-line growth may be challenged in the near term due to weaker sales in the family takaful portfolio as a result of the economic downturn related to the COVID-19 pandemic.