The ratings reflect NTF’s balance sheet strength, which A.M. Best categorises as strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management. The ratings also factor in the group’s exposure to the moderate levels of political and financial system risk associated with operating exclusively within the UAE.
NTF’s balance sheet strength assessment has shown a modest improvement during 2017. Following a capital injection of AED 32.5 million in the fourth quarter of 2017, NTF’s risk-adjusted capitalisation, as assessed by Best’s Capital Adequacy Ratio model, has improved marginally. Furthermore, by liquidating unrated sukuks and mutual funds and investing the new capital in cash, the company has reduced investment risk and enhanced its liquidity position. Prospective risk-adjusted capitalisation is likely to be influenced by the growth and performance of the medical portfolio. Offsetting rating factors include the company’s moderate reliance on reinsurance on its health business and a concentrated investment portfolio that is restricted to the UAE. The injection of capital, coupled with the adjustments to the company’s asset profile, has improved NTF’s minimum capital requirement in line with regulatory limits. However, there still remains uncertainty regarding the solvency of the Takaful fund, for which the company is in dialogue with the regulator.
A.M. Best’s adequate assessment of NTF’s operating performance is based on its gradually increasing profits, underpinned by positive underwriting performance on the life insurance portfolio, which is offset partially by losses on the medical insurance business. Investment returns also continue to supplement technical profitability. NTF’s recently appointed management team has taken proactive steps to improve performance, in particular through the introduction of unit-linked individual life insurance policies. The company’s third-quarter results for 2017 indicate operating profits should be achieved at year-end, albeit at a lower level compared to 2016, during which a one-off accounting adjustment for deferred acquisition costs boosted profitability.
NTF operates as a small composite Takaful insurer in the UAE. The company was established in 2008 and has struggled to establish a presence in the highly competitive life and health insurance market. NTF aims to expand its profile through targeting the retail insurance sector via direct sales channels and also via its Dubai Health Authority Participating Insurer licence which was acquired in February 2017.
© Press Release 2018
