AM Best Affirms Credit Ratings of Singapore Reinsurance Corporation Limited

AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Singapore Reinsurance Corporation Limited (Singapore Re) (Singapore). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Singapore Re’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. In addition, the ratings factor in rating enhancement from the company’s ultimate parent, Fairfax Financial Holdings Limited (Fairfax) [TSX: FFH].

Singapore Re’s balance sheet strength is underpinned by risk-adjusted capitalisation that is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s investment portfolio is focused on cash, deposits and fixed-income securities, albeit with some exposure to higher-risk asset classes such as equities. Singapore Re strategically utilises retrocession to increase its underwriting capacity and manage exposure to catastrophe accumulations and large single risks. The credit quality of the retrocession panel remains excellent, with the majority of reinsurance recoverables held with highly rated counterparties. Additionally, Singapore Re benefits from good financial flexibility due to the support provided by Fairfax.

Singapore Re’s operating performance is assessed as adequate, supported by robust underwriting results and positive investment returns. Historically, Singapore Re’s underwriting performance has shown volatility due to competitive market conditions and elevated natural catastrophe activity; however, this has improved in recent years, driven by favourable claims experience and increased business growth. In 2023, the company recorded an operating profit of SGD 7.3 million, down from SGD 48 million recorded one year prior. This decline was primarily due to a change in the premium recognition basis under IFRS 17, resulting in a one-off reserve adjustment, which was partially offset by higher net investment income. The company’s year-to-date 2024 operating results have normalised and returned to targeted profitability. Singapore Re’s investment income, which comprises mainly interest and dividend income, continues to provide a sizable contribution to overall earnings. Prospectively, AM Best expects Singapore Re’s operating performance to remain at the adequate level, supported by robust business growth while maintaining prudent underwriting discipline.

AM Best assesses Singapore Re’s business profile as limited. Singapore Re is a modest-sized non-life reinsurer based in Singapore, writing treaty and facultative business mainly in Asia and the Middle East. Geographic diversification is provided by operations spanning Asia and the Middle East, with Singapore and India being the company’s two largest markets, based on 2023 gross premium written. A partially offsetting factor is the company’s elevated cedant concentration risk; however, this risk is partly mitigated by the fact that some of its largest cedants are companies within the Fairfax group or affiliates and others that have long-standing relationships.

The rating enhancement from Fairfax factors in explicit and implicit support from the group, including access to shared resources and services across various business functions. Despite Singapore Re’s operations accounting for a small component of Fairfax’s consolidated revenue and earnings, the company is considered strategically important to the group’s international expansion strategy and provides access to local and regional business.

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

This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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