Moody's Ratings (Moody's) has assigned an 'A1' insurance financial strength rating (IFSR) to National Insurance Company-Daman (Daman), along with an 'a2' Baseline Credit Assessment (BCA). The outlook is 'Stable'.
Based in the UAE, Daman is a top-tier health insurance company with a new and growing presence in property and casualty (P&C) lines.
Ratings rationale
Moody’s says that the assignment of the ‘A1’ IFSR reflects:
(i) its top tier market position in UAE and its key role in delivering the Abu Dhabi government's healthcare policy and commitments;
(ii) strong asset quality resulting from high quality reinsurance support and its high quality, liquid investment portfolio with negligible exposure to higher risk assets;
(iii) good capital adequacy that benefits from strong organic capital generation and is resilient to stress;
(iv) strong profitability, driven by good underwriting results, well-controlled expenses and steady investment income; and (v) good reserve adequacy and moderate reserve risk supported by its good technical expertise and risk management capabilities.
These strengths are partially offset by Daman's concentrated exposure to the UAE—Abu Dhabi in particular—and predominant focus on health insurance which limits its business and geographic diversification. While its nascent expansion into P&C insurance will improve the diversification of its earnings over time, Daman will face execution and increasing underwriting risk as it grows this business.
In accordance with the Moody’s methodology for government-related issuers (GRIs), Daman's ‘A1 ‘IFSR incorporates one notch of uplift from its BCA of ‘a2’ to reflect the rating agency’s expectation of support from the Government of Abu Dhabi, if needed, given the government's 65.85% effective ownership and the insurer's key role in carrying out Abu Dhabi's health policy mandate. This also reflects a very high level of dependence, reflecting the insurer's exposure to the domestic economy and its government related entities.
The rating also incorporates Daman's environmental, social and governance (ESG) considerations, as per the Moody’s General Principles for Assessing Environmental, Social and Governance Risks methodology. The assessment is that Daman's exposure to governance risks is low, reflected in a Governance Issuer Profile Score (IPS) of ‘G-2’, supported by conservative financial strategy and risk management, credible and experienced management, its regulatory and board oversight and involvement of government-owned parent group Pure Health Holding and other government affiliates.
Outlook
The ‘Stable’ outlook reflects the expectation by Moody’s that Daman will maintain its strong asset quality and underwriting profitability despite expected growth and expansion in its premiums, while at the same time maintaining good capital adequacy and liquidity buffers.