SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit ratings (ICR) of “a-” of Asia Capital Reinsurance Group Pte. Ltd. (Asia Capital Re) (Singapore) and Asia Capital Reinsurance Malaysia Sdn. Bhd (ACRM) (Malaysia). A.M. Best also has affirmed the ICR of “bbb-” of ACR Capital Holdings Pte. Ltd. (ACR Holdings) (Singapore). The outlook for all ratings is stable.
Asia Capital Re’s ratings acknowledge its business profile and favorable risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio. Asia Capital Re’s risk-adjusted capitalization is supported by its low underwriting leverage through the use of proportional retrocession arrangements, which is placed with a panel of high quality retrocessionaires. The company has built strong relationships with its key cedants, which have driven Asia Capital Re’s premium growth.
An offsetting rating factor is Asia Capital Re’s weak underwriting profitability that has lagged behind business growth. In addition, difficult operating landscapes in the key markets could hinder profitable growth.
ACRM’s ratings consider its balance sheet strength and the expectation of a tighter integration into ACR Holdings. Currently, ACRM is 30% owned by ACR Holdings and is an affiliate of Asia Capital Re, which is ACR Holdings’ main operating entity.
ACRM’s balance sheet remains supported by a subordinated debt issue and close integration with Asia Capital Re. At present, this includes substantial retrocession protection by Asia Capital Re. ACR Holdings has communicated to A.M. Best the commitment of its Board of Directors to further increase ACRM’s integration into ACR Holdings by the first quarter of 2016. Offsetting rating factors include its weak underwriting performance and the challenges ACRM faces in finding profitable growth opportunities in Malaysia’s non-life reinsurance market. Higher-than-expected retrocession assets are putting pressure on ACRM’s risk-adjusted capitalization. This is partly a result of ACRM’s position as the manager of the Asia Catastrophe Pool and the Asia Agriculture Pool. This risk is managed by the pool’s wide spread of risk and substantial use of affiliated retrocession protection provided by Asia Capital Re.
ACR Holdings’ ratings recognize the standard notching from Asia Capital Re, its primary operating entity.
Asia Capital Re is well-positioned for its ratings. Negative rating pressure could arise from a reduction in risk-adjusted capitalization as a result of deterioration in operating performance.
At present, positive rating momentum is unlikely for ACRM. Negative pressure to the ratings could arise if the expected tighter integration with Asia Capital Re does not materialize by the first quarter of 2016.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
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