AM Best Revises Outlooks to Positive for Asian Reinsurance Corporation

SINGAPORE–(BUSINESS WIRE)–AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Asian Reinsurance Corporation (Asian Re) (Thailand).

These Credit Ratings (ratings) reflect Asian Re’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

The revision of the outlooks to positive reflects AM Best’s expectation that the successful execution of the company’s business plan over the medium term will lead to an improving trend in underwriting and operating performance metrics.

Asian Re’s balance sheet strength assessment 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). Notwithstanding, the company is viewed to have a modest absolute capital base as compared with regional reinsurance peers, which increases the sensitivity of its balance sheet to shock events. A significant offsetting balance sheet strength factor remains Asian Re’s high risk investment strategy, which includes the holding of a sizeable balance of cash and deposits in a sanctioned country and in a country currently in default on its sovereign debt. Although the company has reduced its holdings of some of these assets in recent years, AM Best views this investment strategy as creating increased liquidity and credit risk for Asian Re, as the imposition of existing and future sanctions and/or economic crisis in these respective countries drives a heightened risk of transfer restrictions and/or asset write-offs.

Asian Re’s operating performance is viewed as marginal, with a five-year average return-on-equity ratio of 0.8% and a combined ratio of 114.2% (2018-2022), as calculated by AM Best. The company has reported positive operating results in each of the last five years, except for 2020. Underwriting performance in 2020 was hampered by a reserve strengthening exercise and higher-than-expected claims experience. In response, Asian Re has taken remedial actions, including the discontinuation of some loss-making accounts. This has resulted in its combined ratio improving to 103.3% in 2022 (2021: 107.4%). Prospectively, AM Best expects Asian Re to execute on a business plan aimed at improving underwriting results, which coupled with robust investment returns is expected to support positive overall earnings over the medium term.

AM Best views Asian Re’s business profile as limited, reflecting its position as a regional non-life reinsurer, with a modest-sized gross premium base of USD 23 million in 2022. Following catastrophe events in 2011, Asian Re’s scale and market presence contracted significantly as a result of the need to recapitalise. Despite persistent market and regulatory challenges, Asian Re is expected to continue to implement several strategic initiatives and business partnerships aimed at expanding its underwriting portfolio and market presence over the medium term.

AM Best considers Asian Re’s ERM approach to be appropriate relative to the current size and complexity of its operations. The company continues to develop its risk management framework and has demonstrated improvements in its risk management capabilities over recent years.

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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Contacts

Sin Yee Chuah, CFA
Financial Analyst
+65 6303 5022
sinyee.chuah@ambest.com

Christopher Sharkey
Associate Director, Public Relations
+1 908 882 2310
christopher.sharkey@ambest.com

Myles Gould
Director, Analytics
+44 20 7397 0304
myles.gould@ambest.com

Al Slavin
Senior Public Relations Specialist
+1 908 882 2318
al.slavin@ambest.com