HONG KONG, May 30 -- (Bernama-BUSINESS WIRE) -- A.M. Best has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and the issuer credit ratings to “a-” from “a” of DTRIC Insurance Company, Limited (DTRIC) and its reinsured affiliate, DTRIC Insurance Underwriters, Limited. The outlook for each rating has been revised to stable from negative. Both companies are domiciled in Honolulu, Hawaii.

The rating downgrades reflect the continued deterioration in the company’s risk-adjusted capitalization over the past three years, as measured by Best’s Capital Adequacy Ratio, and the historical volatility in its operating performance. The ratings reflect the implicit and explicit support provided by its major shareholder, Aioi Nissay Dowa Insurance Company Limited (ADI), which owns approximately 75% of DTRIC’s shares. ADI provides a wide range of support by developing DTRIC’s auto insurance business through Toyota dealers, participating in DTRIC’s reinsurance arrangements, helping the company enhance its enterprise risk management scheme and providing a financial guarantee.

The decline in risk-adjusted capitalization in 2015 was primarily driven by the increase in unrealized capital losses that offset the modest improvement in profitability. DTRIC experienced a significant amount of unrealized losses on equity investments in 2015, especially in energy sector which was hit by the drop in oil prices.

Management has continued to implement countermeasures to restore profitability over the past three years, which has led to a modest net profit in 2015. Nonetheless, underwriting losses resulted from inadequate pricing on major lines of business in 2012, along with continued adverse reserve development in the workers’ compensation line in the past three years. Overall, the company’s five-year results underperformed the industry in several key financial measures.

Positive rating actions may occur if the company’s risk-adjusted capitalization improves significantly and operating performance stabilizes in line with the performance of DTRIC’s peers.

Negative rating actions may occur if the company’s operating performance or risk-adjusted capitalization further deteriorates.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

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