AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” (Good) to DavidShield Insurance Company (DSIC) (Israel). DSIC is a wholly owned subsidiary of DavidShield PassportCard Ltd (PassportCard Group), which is ultimately majority-owned by its parent company, White Mountains Insurance Group, Ltd. (WTM) [NYSE: WTM]. The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect DSIC’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider the explicit support received from WTM.

DSIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company benefits from a conservative investment portfolio, as well as good financial flexibility from WTM and a strong liquidity profile. As per its business model as a fronting company, DSIC is highly dependent on reinsurance; however, this is mitigated partially by the use of highly rated reinsurance partners, with the lead reinsurer having a long-standing, strategic relationship with the company. The balance sheet assessment additionally considers the moderate debt leverage within the wider PassportCard Group.

DSIC’s profitability is driven by robust reinsurance commissions and fee income, as evidenced by a five-year (2020-2024) weighted average return on capital and surplus of 23.7%. The company does not retain any underwriting risk. Its earnings have been growing steadily, albeit from a small base, with a compound annual growth rate in before-tax profits of 14.2% in the four years to 2024. DSIC’s book of business has a long history of excellent gross underwriting performance (gross of reinsurance), which ultimately benefits DSIC through reinsurance commissions. The company’s stable investment income further supports its overall operating performance. AM Best’s performance analysis includes consideration of the wider PassportCard Group, which has been constrained as it invests in geographic diversification. AM Best expects the PassportCard Group to become sustainably profitable over the short-to-medium term as its foreign business gains scale.

DSIC is a fronting insurer for the PassportCard Group, specialising in travel and international private medical insurance. The company is the market leader for these lines in Israel, with its success driven by its innovative technological customer solutions, primarily the PassportCard product. Whilst it is concentrated in two lines of business, the company benefits from diversification through the geographical spread of its policyholders. It also has a growing insurance administration services business with large international companies that are looking to leverage their unique technology.

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