Best Affirms Singapore Re ‘A-‘ Rating

January 13, 2006

A.M. Best Co. announced that it has affirmed the financial strength rating of “A-” (Excellent) and the issuer credit rating of “a-” of Singapore Reinsurance Corporation Limited (Singapore Re) with a stable outlook.

“The ratings reflect the company’s strong capitalization, improvement in underwriting performance and establishment of a new business model,” said Best. “Singapore Re’s strong capitalization is demonstrated by its conservative local capital adequacy ratio and net underwriting leverage ratio, which stood at 333 percent and 0.4 times, respectively, for the fiscal year ended 2004.

“The net underwriting leverage ratio is expected to decrease further in fiscal year 2005, given that the net premium written declined by over 30 percent for the first nine months in fiscal year 2005. The company’s outstanding Best’s Capital Adequacy Ratio, which measures capitalization on a risk-adjusted basis, further demonstrates the substantial cushion that exists.”

Best noted:”After experiencing an underwriting loss of SGD 1.9 million ($ 1.1 million) in fiscal year 2003, Singapore Re recorded an underwriting profit of SGD 61 thousand ($ 37 thousand) in fiscal year 2004 due to lower net incurred losses. The profitable underwriting trend continues in fiscal year 2005, which has further increased to SGD 1.6 million ($1 million) for the first nine months in fiscal year 2005.

“After the termination of the Voluntary Cession Market Agreement at year-end 2004, Singapore Re actively canvassed the direct insurance companies in Singapore to each sign a Bilateral Cession Agreement. Singapore Re was able to secure approximately 55 percent support based on historical gross premiums reported by cedants. Under this new business model, Singapore Re has more flexibility in risk selection.”

Offsetting factors, cited by Best, include: “Lack of geographical diversification and difficult environment obtaining greater retrocession support for proportional business.

“Singapore Re generates most of its business from Singapore. As a counter measure to the termination of Voluntary Cession, the company is now expanding its business in selected overseas markets, particularly in China and India. Considering the absolute capital size of Singapore Re, it will be a challenge for the company to generate overseas business that is as profitable as domestic business.”

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