Best’s News & Research Service - June 22, 2023 11:16 AM (EDT)
AM Best Affirms Credit Ratings of United Overseas Insurance Limited
- June 22, 2023 11:16 AM (EDT)
Singapore //BestWire// - AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of “aa-” (Superior) of United Overseas Insurance Limited (UOI) (Singapore). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect UOI’s balance sheet strength, which AM Best assesses as very strong, as well as its very strong operating performance, neutral business profile and appropriate enterprise risk management. In addition, UOI’s ratings factor in rating enhancement from the company’s ultimate majority ownership by, and importance to, United Overseas Bank Limited (UOB), a leading banking corporation in Asia.
UOI’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which is expected to remain comfortably at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). UOI has demonstrated good internal capital generation over time, however shareholders’ equity declined by 6.4% in 2022 due to a decline in its investment asset fair value. AM Best views the company’s investment portfolio as having moderate risk. In 2022, UOI reduced its exposure to equity investments to approximately 20% of its total investment assets in favour of high-quality fixed-income securities, cash and deposits. A partially offsetting balance sheet strength factor remains the company’s reliance on reinsurance usage, which enables the underwriting of large limit risks. Nonetheless, AM Best views the company’s reinsurance management strategy as appropriate to mitigate balance sheet volatility arising from large loss and catastrophe losses, and its credit risk is mitigated by a reinsurance panel that consists of well-rated counterparties.
AM Best views the company’s operating performance as very strong, supported by consistently favourable underwriting results and a five-year average return-on-equity ratio of 6.4% (2018-2022). UOI’s underwriting performance remained highly profitable in 2022 given its low loss ratio and net acquisition expenses, which benefit from favourable inwards reinsurance commissions. Overall net profit declined by 37% in 2022, primarily due to lower investment profits driven by investment market volatility. Notwithstanding, the company’s investment returns remain favourable and are an important contributor to overall earnings.
As the sole insurance subsidiary of UOB, UOI benefits from cross-selling insurance policies to UOB customers. The company’s affiliation with its banking parent enables good access to business through the bancassurance channel. UOI’s underwriting portfolio remains focused predominantly in Singapore, whereby approximately three quarter of gross premiums is sourced locally. Regional business expansion over the medium term is expected to be aligned with opportunities arising in connection with the group’s strategy.
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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.