2013-09-26 21:35:04 -
A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of First Capital Insurance Limited (First Capital) (Singapore). The outlook for both ratings is stable.
The ratings reflect First Capital’s adequate risk-adjusted capitalization, consistent operating performance and the support it receives from Fairfax Financial Holdings Limited through a non-dividend payout policy.
First Capital’s reported surplus grew by 20.6% to SGD 357.5 million in 2012, which is double the level it was in fiscal year 2008. The growth in First Capital’s reported surplus in fiscal year 2012 was generally in line with the growth of its insurance portfolio and balance sheet risks.
As a result, the company’s risk-adjusted capitalization in 2012 was maintained at
a level similar to the previous year, which is adequate to support its current ratings as demonstrated by Best’s Capital Adequacy Ratio (BCAR).
First Capital has a good track record of favorable operating results over the past five years through 2012. The five-year average combined ratio was approximately 82%. The company’s net loss ratio increased to 84% in fiscal year 2012 from 79% for the previous year, primarily due to losses incurred from the 2011 Thailand floods and an increase in the loss ratio of the hull business. Nonetheless, First Capital’s overall loss ratio and combined ratio have shown moderate volatility over the past five years. The company generated a SGD 25.0 million underwriting profit in fiscal year 2012.
Offsetting these positive rating factors is the increasing insurance market competition in the Asia-Pacific region.
First Capital’s portfolio was mainly composed of marine hull (33%), fire (24%) and motor (16%) in fiscal year 2012, and the proportion of gross premium generated from the offshore insurance fund (OIF) was 41%.
Recently, some insurers in the region have targeted to grow their hull business in order to diversify their insurance portfolios from high property risk accumulations. The increasing competition has generally brought down hull premium rates, and A.M. Best expects this will continue in the near term.
Upward rating actions could occur if First Capital shows improvement in its risk-adjusted capitalization and maintains consistently favorable operating performance. Conversely, negative rating actions could occur if the company’s operating performance deteriorates materially, or its risk-adjusted capitalization declines to a level below A.M. Best’s expectations.
The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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