Best’s News & Research Service - April 26, 2019 10:11 AM (EDT)
AM Best Affirms Credit Ratings of United Overseas Insurance Limited
- April 26, 2019 10:11 AM (EDT)
Singapore //BestWire// - AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of “aa-” of United Overseas Insurance Limited (UOI) (Singapore). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect UOI’s balance sheet strength, which AM Best categorizes as very strong, as well as its very strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). In addition, the ratings factor a positive impact from the company’s ultimate majority ownership by United Overseas Bank Limited (UOB).
UOI’s balance sheet strength is underpinned by its risk-adjusted capitalization, which AM Best expects to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by controlled underwriting growth, a balanced investment strategy and strong internal capital generation. Over the past five years, consistently strong retained earnings have enabled the company to grow reported shareholders’ equity to SGD 378 million in 2018, from SGD 303 million in 2014.
The company has a track record of very strong operating performance, as evidenced by a five-year average combined ratio of 49% and an operating ratio of 21% (2014-2018). Excellent underwriting performance has been driven by very favorable loss ratios emanating from the company’s targeted underwriting approach and access to affiliated bank channel business from UOB. Technical results in recent years also have benefited from significant inward commissions, reflecting the strong performance of business ceded to reinsurers. Consistent and favorable investment income, arising from the company’s large invested asset base, also has been a key contributor to overall earnings. Prospectively, AM Best expects UOI’s key performance metrics to continue exceeding those of its non-life insurance peers in Singapore.
AM Best views UOI as having a strong competitive position in its key business lines as the sole insurance subsidiary of UOB. UOI’s affiliation with its banking parent enables good access to business through the bancassurance channel, as well as a strong brand and reputation to trade upon in other target segments. UOI’s underwriting portfolio remains focused predominantly in Singapore, with the company expected to approach regional growth cautiously and remain centered on opportunities arising in connection with UOB’s regional operations.
The company has a developed ERM framework, which AM Best considers appropriate for the size and complexity of UOI’s operations. Risk management capabilities are robust and typically viewed as adequate, relative to the company’s core risks.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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