Best Affirms Singapore Reinsurance ‘A-‘ Rating

October 21, 2003

A.M. Best Co. announced that it has affirmed the financial strength rating of A- (Excellent) of Singapore Reinsurance Corporation Ltd. with a stable outlook.

“The rating reflects Singapore Reinsurance’s superior financial strength, resilient earning profile and well-established presence in the Singapore market, said Best. It also “considers the improved pricing environment, which has contributed to its underwriting margin.”

Best noted that “Singapore Reinsurance is strongly capitalized on a risk-adjusted basis. At the end of fiscal year 2002, the company’s statutory solvency ratio stood at 186%. The Best’s Capital Adequacy Ratio (BCAR), which measures capitalization on a risk-adjusted basis, demonstrated that the company is superiorly capitalized. The net underwriting leverage ratio, standing at 0.36 times as at the end of 2002, reflects the company’s adequate capital.”

The report added that “Despite the recent global economic downturn, Singapore Reinsurance consistently generated an operating profit due to its prudent investment policy. Compared to other regional reinsurers, Singapore Reinsurance’s underwriting results are superior, which is reflected in the relatively high level of return on asset and return on net premiums as at the end of 2002 (3.4% and 16.7%, respectively).”

It also stressed that the company is well established in its domestic market with over a 20 percent market share at the end of 2002. “Although the competition in the Singapore market is intense, with 20 reinsurers and a market total of over USD 180 million in gross premium, Singapore Reinsurance’s market presence remains strong,” said Best.

It noted, however, that “These factors are partially offset by the company’s deteriorating underwriting margin and small underwriting capacity in overseas business. In addition, the unfavorable investment environment in fiscal year 2002 continued to pressure the company’s overall profitability.” Best also indicated that the company’s “underwriting result improved slightly and was directly affected by the under-pricing of the automobile line of business in the market. The company’s automobile loss ratio deteriorated from 90.1% in 2001 to 93.6% in 2002.

“Singapore Reinsurance’s business profile on a global scale is less established than other regional reinsurers due to its underwriting policy avoiding the high-risk markets. The size of the company is smaller than its regional peers, and almost 90% of the company’s business is generated from domestic business. Consequently, the extent of organic growth in premium from the overseas portfolio will be limited, although increasing marketing efforts are being made in China and India,” the bulletin concluded.

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