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FOR IMMEDIATE RELEASE
HONG KONG - JANUARY 28, 2013 12:00 AM (EST)
A.M. Best Asia-Pacific Limited has assigned a financial strength rating of A (Excellent) and issuer credit ratings of “a” to Chartis Singapore Insurance Pte. Ltd. (Chartis Singapore) (Singapore) and its fully-owned subsidiaries, Chartis Australia Insurance Limited (Chartis Australia) (Australia) and Chartis Insurance Hong Kong Limited (Chartis Hong Kong) (Hong Kong). The ultimate parent company is American International Group, Inc. (New York, NY). The outlook assigned to all ratings is stable.
Chartis Singapore’s ratings reflect its solid capitalization, diversified insurance portfolio and leading market position of Chartis Singapore and its subsidiaries in the Asia-Pacific region.
Chartis Singapore’s insurance portfolio is well diversified geographically in countries in the Asia-Pacific through various distribution channels and has a balanced mix of various consumer lines and commercial lines. Having a balanced mix of business, together the companies’ underwriting, claims and client servicing capabilities strengthen Chartis Singapore’s leading market position throughout the Asia-Pacific region, provide competitive advantages in servicing multinational client accounts and provide benefits of risk diversification.
Chartis Singapore also is a leading insurer in the Singapore local non-life insurance market. Its underwriting and operating performance from local business has generally been favorable with moderate volatility. The company maintains a buffer above local regulatory capital requirements.
Offsetting these positive rating factors are the impact from potential major natural catastrophes and potentially high dividends in the coming years. On a consolidated basis, the underwriting result for Chartis Singapore and its subsidiaries had been unfavorable between 2009 and 2011, largely due to the high severity losses from various catastrophe events in the Asia-Pacific region, which reduced the benefit of geographic diversification.
Chartis Australia’s ratings recognize its balance sheet strength and operating performance. The company’s balance sheet strength is expected to remain strong over the near term. Chartis Australia’s operating performance benefits from its large investment portfolio, which amounted to over five times of net earned premiums in fiscal year 2011. This helps to offset potential underwriting fluctuations and supports overall profitability.
Offsetting rating factors include Chartis Australia’s long-tail business challenges and its reinsurance concentration. With significant long-tailed underwriting risks, the current yield environment poses challenges to Chartis Australia’s asset liability management. Chartis Australia’s reinsurance protection is mostly provided by affiliates, and a significant deterioration in the affiliates’s financial strength would negatively impact its capital requirements. This risk is managed by collateral arrangements.
Chartis Hong Kong’s ratings acknowledge its solid risk-adjusted capitalization. The parent injected capital into Chartis Hong Kong in order to establish its underwriting capability, with the capital size supportive of its current ratings. The company also has a strong market presence in both consumer and commercial insurance businesses in Hong Kong. Moreover, the highly conservative asset allocation strategy minimizes the investment risk and provides sufficient liquidity.
Offsetting rating factors include the volatility of Chartis Hong Kong’s financial lines of insurance business. The global financial crisis and the slowdown in investment market activities in the past few years reduced its business volume of financial insurance and resulted in an unfavorable underwriting performance. Since Chartis Hong Kong relies on the reinsurance protection internally provided by the counterparties in the parent group, any changes in the financial strength of the group will impact Chartis Hong Kong’s risk protection. The consolidation among top tier non-life insurers in Hong Kong will also increase the competition.
These three companies are well placed for their ratings. Negative rating actions could occur if there is a significant worsening of their operating results and a substantial deterioration in their risk-adjusted capitalization. Any unfavorable rating actions on the parent could also put downward pressure on the companies’ 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: “Catastrophe Analysis in A.M. Best Ratings”; “Rating Members of Insurance Groups”; “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.
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.