Wed Dec 26, 2012 5:13am EST
Dec 26 -
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Summary analysis -- Chartis Singapore Insurance Pte. Ltd. --------- 26-Dec-2012
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CREDIT RATING: Country: Singapore
Local currency A/Stable/--
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Credit Rating History:
Local currency Foreign currency
28-Feb-2011 A/-- --/--
22-Dec-2010 A+/-- --/--
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Rationale
The ratings on Chartis Singapore Insurance Pte. Ltd. reflect the company's core status to the Chartis group (we rate the Chartis group's core operating companies A/Stable/--). Chartis Singapore is a regional hub for the group's Asia-Pacific (excluding Japan) operations and the company's operations in Singapore are substantial and profitable. Chartis Singapore has strong integration with, and support from, the group. Chartis Singapore's exposure to increased competition and softening rates in its domestic market partly offsets these strengths.
We view Chartis Singapore's stand-alone credit profile as strong, reflecting the company's strong business position in the local non-life insurance market (with a 13% share) and conservative investment portfolio.
Chartis Singapore is an indirect subsidiary of Chartis Inc., which is ultimately owned by American International Group Inc. (AIG; A-/Negative/A-2). Chartis Singapore benefits from access to its group's resources, expertise, and extensive reinsurance support. As part of the Chartis group's efforts to simplify its legal and organizational structure, Chartis has established three geographic segments, of which one covers the Asia-Pacific region. The majority of branch operations in Asia-Pacific have converted to locally domiciled subsidiaries, with regional oversight by Chartis Singapore.
We view Chartis Singapore's capitalization as strong. Moreover the Chartis group provides strong reinsurance support to the company. As part of the group's capital management strategy, risk from volatile lines of business, such as energy, financial lines, and commercial property, are ceded to the Chartis group. The local entity retains the risk on less volatile business lines, such as accident and health, and motor. Chartis Singapore's conservative investment portfolio supports its capital position. About 94% of invested assets are in cash, deposits, and bonds.
Continued softening in premium rates and continued pursuit of multinational business by competitors have added to the challenges for Chartis Singapore. In addition, the increasing cost of vehicle ownership has dampened growth opportunities in motor insurance, where the company has a significant market share. Chartis Singapore's operating performance has been good in the past few years, although its underwriting performance has moderated somewhat in 2011-2012. We expect Chartis Singapore's remediation efforts on unprofitable business and continued efforts to leverage its distribution capabilities to improve its operating performance.
Enterprise risk management
In our view, Chartis Singapore's risk controls over factors such as insurance, investment, and operations are adequate relative to the nature of the company's overall risk as well as local standards.
Our view of Chartis Singapore's enterprise risk management reflects our assessment of the risk characteristics of its ultimate parent, AIG.
Outlook
The stable outlook on Chartis Singapore is in line with the outlook on the Chartis group.
The outlook on the Chartis group in turn reflects the stable outlook on its ultimate parent, AIG. We view the Chartis group as strategically important to AIG. We could lower our ratings on AIG and Chartis if the group's performance were to fall short of our expectations, particularly with regard to earnings, capitalization (currently strong), liquidity, or leverage. On the other hand, we could raise the ratings if the consolidated group were to improve its operating performance, particularly at the Chartis level, to above the industry average while continuing to improve AIG's risk profile.
The ratings on Chartis Singapore are at the same level as that on the Chartis group. If we upgrade Chartis group, we could upgrade Chartis Singapore if our view of Chartis Singapore's status within the group remains unchanged.
We could raise Chartis Singapore's stand-alone credit profile if the company improves its business position while maintaining its financial profile. We could lower the stand-alone credit profile if the company's operating performance deteriorates, thereby affecting its capital position.
Related Criteria And Research
-- Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010
-- Interactive Ratings Methodology, April 22, 2009
-- General: Group Methodology, April 22, 2009
-- Summary Of Standard & Poor's Enterprise Risk Management Evaluation Process For Insurers, Nov. 26, 2007
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