HONG KONG--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Singapore Reinsurance Corporation Limited (Singapore Re) (Singapore). The outlook for both ratings is stable.
The ratings reflect Singapore Re’s excellent risk-based capitalization and prudent underwriting practice. The ratings also acknowledge the company’s conservative and highly liquid investment portfolio as nearly 67% of its total assets in 2010 were allocated in cash and deposits and good quality fixed income securities.
Singapore Re’s risk-based capitalization was maintained at a sound level for fiscal year 2010. A.M. Best believes Singapore Re is in a good position to absorb any single market event and any further risk retention based on its historical capitalization and current insurance leverage. A.M. Best also believes that the financial strength of Singapore Re will remain strong for fiscal year 2011, regardless of the losses from the Thai flooding.
Singapore Re maintains a flexible and prudent underwriting policy that is reflected by the favorable level of its loss ratio between 2006 and 2010, except in 2008 due to several event losses in China. A.M. Best expects that Singapore Re’s underwriting results could be negative and attributes this to additional claims reserves set aside for the losses from the Thai flooding. Recent consolidation and growth of the insurance market could render greater diversification opportunities for Singapore Re.
Offsetting rating factors include the difficult landscape of the insurance market where Singapore Re operates, as well as the competitive reinsurance market in Asia, which challenges any profitable overseas expansion. Another offsetting rating factor is Singapore Re’s high expense ratio relative to its competitors, which has stood at a high level in the mid 40s over the past four years.
Factors that may lead to positive rating actions for Singapore Re include an improving trend in its expense ratio to stay competitive in the Asian reinsurance market; long-term and sustainable strong operating profitability relative to its peer group; and maintaining its strong risk-based capital level.
Negative rating pressure could occur should Singapore Re’s underwriting results significantly weaken to the point that its financial condition decreases to a level that would no longer be supportive of the current ratings.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; and “Assessing Country Risk.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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