A.M. Best Affirms Ratings of Asian Reinsurance Corporation

A.M. Best has affirmed the financial strength rating (FSR) of B (Fair) and the issuer credit rating (ICR) of “bb” of Asian Reinsurance Corporation (Asian Re) (Thailand). The outlook for the ICR is positive while the outlook for the FSR is stable.

The rating affirmations and positive outlook on the ICR reflect Asian Re’s improved capitalization, the positive signal from a debt-equity swap (DES) agreement and improved catastrophe management.

Asian Re has continued to improve its capitalization. In addition to the Thailand government's capital injection of THB 219 million (USD 6.8 million) on Feb. 10, 2014, Asian Re has completed USD 13.1 million in debt equity swap agreements with its insurance creditors since the beginning of 2014. Asian Re will continue to strengthen its capitalization through capital injections from other member countries and debt equity swap agreements with other insurance creditors.

After the Thailand Flood loss, Asian Re’s catastrophe exposure had been gradually reduced due to a smaller underwriting portfolio and event limits in place for its proportional reinsurance treaties. The company has further increased the catastrophe retrocession excess of loss cover limit to safeguard its capitalization.

Offsetting these positive rating factors is the uncertainty surrounding the ultimate settlement on the Thailand Flood losses and its weakened profile.

Asian Re's business from the existing clients had been decreased drastically after the rating downgrade in 2012. It will take time for Asian Re to regain the market's confidence.

Further positive rating actions could occur if Asian Re can continue to improve the capitalization level and maintain the favorable operating performance. Conversely, negative rating actions could occur if the company's risk-adjusted capitalization declines to a level below A.M. Best's expectations due to unfavorable operating results or adverse development in the company’s loss reserves for the 2011 Thailand Flooding.

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
• Evaluating Country Risk
• Risk Management and the Rating Process for Insurance Companies
• Understanding Universal BCAR

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

This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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