News - Takaful

• Moderate business profile: Fitch’s assessment of ADNTC’s business profile is driven by the company’s moderate operating scale, competitive positioning, business risk profile and diversification. ADNTC is a takaful insurance company with AED447m ($122m) of gross written contributions in 2022 (2021: AED370m), making it a top 20 listed insurer in the UAE and one of the leading takaful insurers. The company is well-diversified by line of business, writing a mix of personal and commercial lines in takaful property and casualty business as well as family and health takaful products.
• Very strong capitalisation: Fitch views ADNTC’s capitalisation and leverage as a rating strength. Based on Fitch’s prism factor based model, capitalisation is assessed as extremely strong. On a regulatory basis, under the Central Bank of the UAE’s methodology, the company had an extremely strong regulatory capital ratio, with investment risk making up the largest proportion of the capital requirement. There is no financial leverage in the capital structure.
• Strong profitability despite 2022 results: The insurer has a strong record of net profit growth. However, 2022 saw a decline in net profit, following a negative underwriting result. The Fitch-calculated combined ratio weakened to 112% in 2022 from 70% in 2021. The three-year average remained strong at 82.7%. The deteriorated underwriting result was due to poor profitability in motor and medical insurance, which was undermined by inflationary pressure and difficult market conditions.
• Prudent investment portfolio: Despite an increase in its investment risk appetite, ADNTC maintains a prudent investment portfolio. At the end-2022, 60% of investments were held in cash and term deposits, compared with 71% at end-2019, with increasing exposure to equity instruments, which accounted for 32% at end-2022 compared with 14% at end-2019. As a result, the company’s Fitch-calculated risky-assets-to-capital ratio weakened to 55% at end-2022 from 30% at end-2021.
• Reserving at best estimate: ADNTC performs regular valuations of its reserves, which are reviewed by external actuaries. In addition, external auditors also review the reserving position as part of the annual audit and the company is subject to regulatory audits from the Central Bank of the UAE.
• Strong reinsurance panel: ADNTC makes significant use of reinsurance across all lines of business. The panel of reinsurers includes large globally diversified reinsurers, with several programmes led by large globally diversified reinsurance groups. Other reinsurers on the panels are also generally rated at least ‘A-’. M