Best Affirms Asia Capital Re Ratings

December 31, 2007

A.M. Best Co. has affirmed the financial strength rating of ‘A’- (Excellent) and the issuer credit rating of “a-” of Singapore-based Asia Capital Reinsurance Group Pte. Ltd. (ACR) with stable outlooks.

“The ratings reflect ACR’s strong capitalization, experienced management team, strong risk management capabilities and ability to attract experienced underwriters,” Best noted. “ACR started underwriting business earlier this year with an exclusive focus on the Asian reinsurance market, including the Middle East and Australasia. The company’s initial capitalization was $565 million, with which it can underwrite relatively larger insurance risks versus other reinsurers domiciled in Asia.”

Best described ACR’s business plan as having been developed through “rigorous analysis and comprehensive market data;” as a result its “profitability assumptions seem realistic compared to the market data.” ACR’s financial projections “show that first-year revenue will fall short of target due to a late start,” Best continued, as it had missed the December renewal period in 2006. “However, it has not changed its business target for subsequent years,” and in Best’s opinion it “can reach its revenue target if the existing business is successfully renewed in 2008 and new business continues to be generated.”

Best also indicated that ACR’s “senior management has a track record of underwriting and in-depth knowledge in the Asian market with good networks across Asia. Malaysian Joint Venture (JV) was formed and other JVs will be formed from the holding company level for ACR to enter strategic markets.

The “competitive reinsurance market and the higher than planned expenses in year 2007,” should, however be taken into account as offsetting factors. In Bes ‘s opinion the “expense issue will be mitigated as the company continues to grow its revenue.” In addition, “although operational risk has subsided significantly, the company still faces some risk of running multiple satellite offices and JVs in the early stages of its operation.”

Source: A.M. Best –

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