UAE-Based HDFC International Life and Re Company Limited Ratings Affirmed At 'BBB'; Outlook Stable

Dubai-based HDFC International Life and Re Company Ltd. (HDFC Life Re) benefits from 'AAA' level risk-based capital adequacy as per our model, albeit constrained by a relatively small capital base in absolute terms.
The reinsurer has a low risk tolerance in terms of its investment portfolio, with 100% of its assets invested in government bonds and bank deposits, resulting in exceptional liquidity.
We are therefore affirming our 'BBB' ratings on HDFC Life Re.
The stable outlook reflects our view that HDFC Life Re will maintain its robust capital adequacy and low risk tolerance while continuing to improve its operating performance and gradually diversifying its premium base in the Middle East and North Africa.
DUBAI (S&P Global Ratings) Sept. 16, 2019--S&P Global Ratings today affirmed its 'BBB' insurer financial strength ratings on Dubai-based life reinsurer HDFC International Life and Re Company Ltd. (HDFC Life Re). The outlook is stable.
The stable outlook reflects our view that HDFC Life Re will maintain its 'AAA' level capital adequacy and low risk tolerance, while gradually increasing its premium base in both the United Arab Emirates (UAE) and the wider Middle East and North Africa region, and continue to report positive operating performance on both a technical and overall basis.
We could lower the rating on HDFC Life Re over the next two years if:
Business growth and geographical diversification does not materialize according to company's forecasts and our expectations;
The company's reliance on single counterparties for revenue generation does not gradually diminish;
The company's operational and financial dependence on the parent increases to a level where we believe that a weakness in the parent's creditworthiness could adversely affect the company's financial strength; or
Capital adequacy deteriorates below 'AAA' level as a result of earnings volatility, stronger-than-expected premium growth, or the failure of the parent to provide timely capital support when required.
We consider an upgrade unlikely over the next two years because of HDFC Life Re's limited scale both in terms of premiums written and capital base.
The ratings on HDFC International Life and Re Company Ltd. (HDFC Life Re) reflects our assessment of the company as a start-up reinsurer, albeit one operating in the relatively low-risk life reinsurance space, supported by robust capital adequacy and abundant liquidity. We consider HDFC Life Re's 'AAA' level capital base as sufficient to support its current business volume and risk profile. However, our assessment is moderated by the absolute size of HDFC Life Re's capital base, with shareholder's equity of about $28.5 million at March 31, 2019, that could be sensitive to a single major event. In our view, HDFC Life Re has a low risk tolerance, supported by its extremely conservative investment strategy, with 100% of the investment portfolio invested in cash, bank deposits, and government bonds of high credit quality. There is no exposure to high-risk assets (equities, real estate, or speculative-grade instruments) and no major foreign-exchange exposure because most of its assets and liabilities are denominated in either U.S. dollar or UAE dirham, which is pegged to the U.S. dollar. HDFC Life Re maintains exceptional levels of liquidity by global standards, supported by its diverse investments in liquid assets, which are generally invested in highly rated instruments.
We work across the world

From London to San Francisco, to our home base in (Saint Helier) Jersey, we’re looking for extraordinary and creative scientists to help us drive the field forward.

AC Investment Inc. currently does not act as an equities executing broker or route orders containing equities securities. If AC Invest’s business model were to change and it begins routing non-directed orders in NMS securities, it will comply with the disclosure requirement of Rule 606.

77 Massachusetts Avenue Cambridge, MA 02139 617-253-1000 pr@ademcetinkaya.com