Nov 29 -
Overview
-- ACR's capitalization is likely to remain moderately strong for the
rating for the next 12-24 months.
-- We are revising the rating outlook on the Singapore-based insurer to
stable from negative.
-- We are also affirming our 'A-' local currency long-term financial
strength and issuer credit ratings.
-- We are also raising our ASEAN regional scale rating on ACR to 'axAA'
from 'axAA-'.
Rating Action
On Nov. 29, 2012, Standard & Poor's Ratings Services revised the rating
outlook on Singapore-based Asia Capital Reinsurance Group Pte. Ltd. (ACR) to
stable from negative. Standard & Poor's also affirmed its 'A-' local currency
long-term financial strength and issuer credit ratings. At the same time, we
raised our ASEAN regional scale rating on ACR to 'axAA' from 'axAA-'.
Rationale
The outlook revision reflects our view that ACR's capitalization is likely to
remain moderately strong for the rating for the next 12-24 months. This is due
to a capital injection by a strategic investor, ACR's quota-share agreement
with U.S.-based National Indemnity Co. (local currency AA+/Negative/--), and
its greater use of retrocession to protect its capital base.
We do not expect loss claims related to the floods in Thailand in 2011 to
increase significantly since we believe the company has received notification
of all substantial claims. ACR has adjusted for the notified claims following
consultations with independent loss adjustors. However, the possibility of
loss development from the adjusted claims still exists. We have accounted for
possible increases in these claims while assessing the company's credit
profile.
We expect ACR's operating performance to recover to satisfactory levels, given
the company's de-risking exercise and the increase in reinsurance premium
rates. The fluctuation in underwriting performance in recent years was mainly
due to the impact of catastrophes in the region. In line with the rest of the
reinsurance industry, ACR has tried to manage its exposure by tightening terms
and conditions on its business, requesting more information on clients'
underlying exposures, and increasing retrocession protection. We expect these
initiatives to lower the volatility in the company's operating performance.
Losses due to the floods in Thailand pushed the company's combined ratio to
134.7% in the fiscal year ended March 31, 2012 (fiscal 2011).
In our opinion, ACR's competitive position is satisfactory. Our view is
despite the company's short operating history and its significant business
growth. ACR's premium growth slowed in fiscal 2011 as it focused on managing
claims, catastrophe exposure, and capital. The company has since shifted focus
back to business growth. In our view, losses related to the Thai floods
weakened clients' confidence in ACR. However, we believe the impact is
manageable and the company's overall business profile is not significantly
affected.
Outlook
The stable outlook reflects our view that ACR's losses related to the floods
in Thailand have stabilized and that the company has sufficient capital buffer
to absorb further increases in claims. We believe the probability of ACR
facing losses similar to those in late 2011 are low due to the tightening of
terms and conditions on new business and higher protection of capital from
retrocession.
We may lower the ratings if ACR's capitalization deteriorates to a level that
is not supportive of the rating and if its underwriting performance weakens
due to significant underwriting losses. We may also lower the ratings if the
company's business profile deteriorates in the upcoming renewals due to
declining confidence of clients in the company.
We may upgrade ACR if its capital is extremely strong, it achieves its
business projections profitably, and its risk management is resilient to
insurance events. We consider the possibility of an upgrade to be remote for
the next two to three years.
Related Criteria And Research
-- Refined Methodology And Assumptions For Analyzing Insurer Capital
Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010
-- Interactive Ratings Methodology, April 22, 2009
-- Group Methodology, April 22, 2009
-- Summary Of Standard & Poor's Enterprise Risk Management Evaluation
Process For Insurers, Nov. 26, 2007
Ratings List
Ratings Affirmed; Outlook Action
To From
Asia Capital Reinsurance Group Pte Ltd.
Counterparty Credit Rating
Local Currency A-/Stable/-- A-/Negative/--
Financial Strength Rating
Local Currency A-/Stable/-- A-/Negative/--
Upgraded
To From
Asia Capital Reinsurance Group Pte Ltd.
ASEAN Rating Scale axAA/--/-- axAA-/--/--
Source: http://news.yahoo.com/text-p-revises-outlook-acr-stable-affirms-rating-094326486--sector.html
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