Best’s News & Research Service - September 19, 2014 01:30 PM (EDT)
A.M. Best Affirms Ratings of First Capital Insurance Limited
Hong Kong //BestWire// - A.M. Best has affirmed the financial strength rating of A (Excellent) and the 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 and consistent operating performance.
First Capital's reported surplus continued to grow in 2013; the company has maintained a no-dividend policy over the past five years. The company's Singapore local capital adequacy ratio increased in 2013 well above the statutory minimum ratio. Also, First Capital's current ratings are well supported by the level of its Best's Capital Adequacy Ratio (BCAR).
First Capital has consistently generated positive operating results in the five-year period that ended in 2013. The five-year average loss ratio and combined ratio are well below 100%, with only slight volatility. The company's underwriting profit in fiscal year 2013 exceeded the five-year average between 2009 and 2013.
Offsetting these positive rating factors are the increasing insurance market competition in the Asia-Pacific region and First Capital's decreasing investment yield.
First Capital's portfolio was mainly composed of marine hull, fire and motor in fiscal year 2013, and the proportion of gross premium generated from the offshore insurance fund was approximately half of the overall revenue. Some regional insurers have continued to grow their marine hull business for diversification purposes, which has increased competition and placed stress on First Capital's profitability and market share in this business line.
Due to the continued low interest rate environment and increased investment allocations to fixed deposits, First Capital's overall investment yield in 2013 has decreased considerably. The company expects low interest rates to continue in 2014.
Upward rating actions could occur if First Capital shows improvement in its risk-adjusted capitalization and maintains a consistently favorable operating performance. Negative rating actions could occur if the company's risk-adjusted capitalization declines to a level below A.M. Best's expectations due to material deterioration in operating performance or aggressive business growth.
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.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which 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.