S&P Raises Ratings on Singapore’s Tenet Insurance Co.

Standard & Poor’s Ratings Services announced that it has raised its long-term insurer financial strength and counterparty credit ratings on Singapore’s Tenet Insurance Co. Ltd. to “BBB” from “BBB-“. The outlook is stable.

“The ratings upgrade reflects the expected continuation of Tenet’s profitable underwriting performance, due to the structural improvement in the insurer’s business portfolio,” stated S&P credit analyst Hwee Hoon Tan. “This was demonstrated through better business line diversity and a reduced reliance on the motor insurance business, which will assist in maintaining positive underwriting performance. Nevertheless, Tenet’s relatively small business franchise and market position in Singapore amid a competitive operating environment remain key challenges for the company.”

S&P indicated that Tenet’s financial profile “remains sound with a robust solvency ratio, as denoted by shareholders’ funds to net premiums written at 322 percent in 2004, a level that compares favorably with its larger domestic peers.

“Profitability also improved in recent years, with a 28 percent return on revenue in 2004, compared with a loss of 3 percent in 2002. The combined ratio improved to 88 percent in 2004 from 100 percent in 2003, as Tenet benefited from some reserve releases with a restructured business portfolio.”

S&P said it expects this improvement in underwriting performance “to continue in the medium term, in view of the increased selectivity of risk exposures. As a result, Tenet is expected to maintain its positive operating results.

“Given the short-tail nature of its business, Tenet maintains a liquid and conservative investment portfolio. As more than half of the investments are in fixed income instruments, investment returns are stable, with an average investment yield of 4 percent over the past five years. Tenet is expected to resume business growth at a moderate pace, as management’s earlier focus was on the rebalancing of its portfolio while maintaining underlying profitability, resulting in limited growth in recent years.

“Tenet is expected to achieve this growth through strengthening its relationship with selected intermediaries, developing alternative distribution networks, and expanding small and midsize enterprise and personal line business. This expansion will be based on selective underwriting with a focus on profitability. The growth is also expected to be well supported by Tenet’s existing strong capital position.”