A.M. Best Affirms Ratings of Asia Capital Reinsurance Group Pte. Ltd and its Associated Companies

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) (Malaysia) and of Asia Capital Reinsurance Malaysia Sdn. Bhd (ACRM) (Malaysia). A.M. Best has also affirmed the ICR of “bbb-” of ACR Capital Holdings Pte. Ltd. (ACR) (Singapore). The outlook for all ratings is stable.

Asia Capital Re’s ratings consider its business profile and balance sheet strength. Since it started writing business, Asia Capital Re has grown its franchise across the Asia Pacific region. Supported by relationships with key cedents, its gross premiums have grown from USD 342 million in 2008 to USD 923 million in 2014. A capital injection after the 2011-12 catastrophe year, helped restore the company’s risk-adjusted capitalization to a level that supports its ratings.

Offsetting rating factors include its internal capital generation track record. Partly due to the 2011-12 catastrophes, the company has yet to show a track record of supporting its risk-adjusted capitalization from retained earnings.

The ratings for ACRM consider its balance sheet strength and its initiatives to deal with the soft market environment in Malaysia. ACRM’s balance sheet remains supported by a subordinated convertible bond until 2017. Underwriting risk is expected to decline during this period as management aims at prioritizing profitability over volume and Malaysia’s reinsurance market remains soft. To manage its expense ratio during this period, the company intends to grow fee income from providing shared services to affiliates and managing existing pool business.

Offsetting rating factors include the difficult environment for profitable growth in Malaysia’s non-life reinsurance market as direct insurers consolidate and retain more risk.

The ratings of ACR recognize the standard notching from Asia Capital Re, its primary operating entity.

Positive rating momentum for Asia Capital Re could occur if the company is able to show a trend of consistently favorable and balanced operating results. A declining trend in the company’s Best Capital Adequacy Ratio due to profits not growing in line with business growth could result in negative rating pressure.

Positive rating momentum is unlikely for ACRM at present. Negative pressure to the ratings could arise if the company’s risk-adjusted capitalization deteriorates due to weak operating performance.

The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Catastrophe Analysis in A.M. Best Ratings
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies
• Understanding Universal BCAR
• Evaluating Country Risk
• Insurance Holding Company and Debt Ratings
• Equity Credit for Hybrid Securities

Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.

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