SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of Asia Capital Reinsurance Group Pte. Ltd. (Asia Capital Re) (Singapore) and its subsidiary, Asia Capital Reinsurance Malaysia Sdn Bhd (ACRM) (Malaysia). AM Best also has affirmed the Long-Term ICR of “bbb-” of the holding company, ACR Capital Holdings Pte. Ltd. (ACR Holdings) (Singapore). The outlook of these Credit Ratings (ratings) is negative.
The ratings of Asia Capital Re reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The ratings of ACRM reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings of ACRM also factor in rating enhancement to reflect the integration with and support received from Asia Capital Re.
Asia Capital Re’s balance sheet strength assessment is underpinned by risk-adjusted capitalization that remains comfortably at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). This is supported by the company’s conservative capital management approach, low premium leverage and a good quality retrocession panel. Other favorable balance sheet factors include the company’s typically conservative investment portfolio and robust approach to asset liability management. A partially offsetting factor is the retained losses exhibited in recent years, which have hampered growth in shareholders’ equity.
AM Best views Asia Capital Re’s operating performance as adequate, albeit the continued application of a negative outlook on the FSR and Long-Term ICR reflects pressure on this assessment. In 2018, the company sustained large losses arising from several catastrophe events, resulting in a combined ratio of 112.9%. Despite this, its loss ratio excluding natural catastrophe losses has improved gradually over the past three years and the expense ratio also has trended downward since 2016, reflecting more prudent underwriting and expense controls implemented by a new management team. Prospectively, AM Best expects the company to continue implementing improvements aimed at returning it to a position of technical and operating profitability over the near-to-medium term. However, AM Best continues to note that challenges remain in executing on this business plan amid the persistent competitive operating environment in many global reinsurance markets.
AM Best views Asia Capital Re’s business profile as neutral given its well-established profile as a regional reinsurer in Asia, as well as in other target markets. In addition, the company’s ERM approach is considered appropriate given the current size and complexity of its operations. Asia Capital Re continues to enhance its ERM framework and strengthen its risk management capabilities, systems and tools.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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