OLDWICK, N.J. - (Business Wire)
A.M. Best Co. has assigned a financial strength rating of B++ (Good) and an issuer credit rating of
“bbb+
” to
China Insurance Co. (Singapore) Pte. Ltd. (CICS). The outlook for both ratings is stable.
The ratings reflect CICS’ diversified underwriting portfolio, solid distribution network, conservative investment strategy and adequate risk-adjusted capitalization. The ratings also acknowledge operational support from its affiliation within China Insurance Group pertaining to investment and reinsurance capacity.
With an operating history of 70 years, CICS has established a strong distribution network with agents and brokers that generated 87% of gross premiums written in 2007. In addition, the company continues to strengthen its direct sales and build up its bancassurance channel by partnering with some Chinese banks. A.M. Best believes that a wider distribution platform will enable CICS to further expand its product reach going forward.
The company maintains a well-diversified underwriting portfolio covering a wide range of insurance products including, motor, bond (predominately immigration bond, also known as foreign workers security bond), workers’ compensation (WC), fire and marine cargo and hull liability.
CICS’ investment portfolio has been conservative, with cash, time deposits and bonds representing 88% of invested assets in 2007. Investment in equities remains low, as stipulated by the Group’s investment guidelines. Improved investment returns from CICS’ prudent investment strategy have largely contributed to the company’s bottom line. However, its investment returns for the first half of 2008 have deteriorated, compared to the same period in 2007, impacted by realized losses from equity investments.
CICS’ risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains supportive of the current ratings. A.M. Best anticipates the company’s risk-adjusted capitalization is likely to remain stable in 2008 and 2009 due to its lower rate business growth and consistent high retention of operating earnings.
Partially offsetting rating factors are unfavorable claim experience of CICS’ motor and WC businesses and competitive market pressures.
In tandem with the local market trend, the underwriting performance of CICS’ motor business remained unfavorable, with a combined ratio of 180% in 2007. Due partly to reserve strengthening, the loss ratio increased to 140% in 2007 from 90% in 2006. A more stringent risk selection and higher premium rates have led to a reduction in motor business, as well as a lower loss ratio of 126% for the first half of 2008. Nonetheless, A.M. Best believes the underwriting profitability will not be recovered to a break-even level in the near future.
In addition to the fragmented general insurance market environment in Singapore, recent new entry of insurers has intensified the market competition. CICS’ growth prospects and ability to improve its overall underwriting profitability could be further challenged.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
A.M. Best Co.
Analysts
Stella Ng, +852-2827-3407
stella.ng@ambest.com
or
Terrence Wong, +852-2827-3403
terrence.wong@ambest.com
or
Public Relations
Jim Peavy, +(1) 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
