HONG KONG--(BUSINESS WIRE)--A.M. Best Co. has assigned a financial strength rating of A (Excellent) and an issuer credit rating of “a+” to United Overseas Insurance Limited (UOI) (Singapore). The outlook assigned to both ratings is positive.
The ratings reflect UOI’s solid risk-adjusted capitalization, prudent underwriting philosophy and strong operating performance.
UOI’s local capital adequacy ratio in fiscal year 2010, which stood above 400%, remains well above the minimum required by Singaporean regulations and ranks at the top compared to its local peers. The company’s risk-adjusted capitalization, as demonstrated by Best’s Capital Adequacy Ratio (BCAR), is adequate to support its current ratings.
UOI has a good track record of favorable operating results. Its combined ratio has been stable at approximately 40% over the past five years, which is largely attributable to UOI’s prudent underwriting philosophy. UOI’s underwriting performance has outperformed the Singapore general insurance market and many Singapore general insurers. Favorable investment returns in the past also largely contributed to UOI’s outstanding operating performance.
Offsetting these positive rating factors is the potential volatility in UOI’s investment returns. In fiscal year 2010, UOI had more than 30% of its invested assets in its equity portfolio. The company’s equity portfolio has exposed UOI to market volatility in recent years; however, in A.M. Best’s opinion, the company is well capitalized to absorb this market volatility.
Future upward movement on the ratings could occur if UOI shows improvement in its risk-adjusted capitalization through continuing strong underwriting and operating performance, continuing growth in capital supported by its operating revenue and improvement in managing the company’s investment risk.
Negative rating actions could occur if the operating performance of UOI deteriorates or if risk-adjusted capitalization declines to a level that is below A.M. Best’s expectations.
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: “Assessing Country Risk”; “Catastrophe Analysis in A.M. Best Ratings”; “Risk Management and the Rating Process for Insurance Companies”; and “Understanding Universal BCAR.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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