TEXT-S&P summary: Asia Capital Reinsurance Group Pte Ltd.

(The following statement was released by the rating agency)

Dec 20 -

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Summary analysis -- Asia Capital Reinsurance Group Pte Ltd. ------- 20-Dec-2012

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CREDIT RATING: Country: Singapore

Local currency A-/Stable/--

Primary SIC: Surety insurance

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Credit Rating History:

Local currency Foreign currency

20-Nov-2008 A-/-- --/--

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Rationale

The ratings on Asia Capital Reinsurance Group Pte. Ltd. (ACR) reflect the

company's satisfactory financial profile and conservative investment profile.

Moderating factors include ACR's fluctuating operating performance and

uncertain emerging risk exposure.

We view ACR's risk-adjusted capitalization as moderately strong and supportive

of the rating. This is despite the impact of losses due to the floods in

Thailand in 2011. A capital injection by a strategic investor has strengthened

the company's capital profile, and the greater use of retrocession protection

has reduced exposure to individual as well as catastrophe risk. We expect

ACR's capitalization to strengthen due to the reduced uncertainty associated

with the company's reserve sufficiency.

ACR's investment profile is also supportive of the rating. The majority of the

company's assets are fixed-interest investments (91.4%) and cash and deposits

(6.1%). ACR uses most of its Asian regional fixed-interest securities to match

liabilities in markets in which it does business.

We expect ACR's operating performance to recover to satisfactory levels over

the next 24 months from the current moderate level. The company's de-risking

exercise and the increase in reinsurance premium rates should support the

improvement. The fluctuation in underwriting performance in recent years was

mainly due to the impact of catastrophes in the region. In line with the rest

of the reinsurance industry, ACR has tried to manage its exposure by

tightening terms and conditions on its business, requesting more information

on clients' underlying exposures, and increasing retrocession protection. We

expect these initiatives to lower the volatility in the company's operating

performance. Losses due to the floods in Thailand pushed the company's

combined ratio to 134.7% in the fiscal year ended March 31, 2012 (fiscal 2011).

We do not expect loss claims related to the floods in Thailand in 2011 to

increase significantly since we believe the company has received notification

of all substantial claims. ACR has adjusted for the notified claims following

consultations with independent loss adjustors. However, the possibility of

loss development from the adjusted claims still exists. We have accounted for

possible increases in these claims while assessing the company's credit

profile.

In our opinion, ACR's competitive position is satisfactory. Our view is

despite the company's short operating history and its significant business

growth. ACR's premium growth slowed in fiscal 2011 as it focused on managing

claims, catastrophe exposure, and capital. The company has since shifted focus

back to business growth. In our view, losses related to the Thai floods

weakened clients' confidence in ACR. However, we believe the impact is

manageable and the company's overall business profile is not significantly

affected.

Enterprise risk management

We assess ACR's enterprise risk management (ERM) as adequate, reflecting our

opinion that the company has an adequate understanding of its main risks, and

has the capability to identify, measure, and manage most of these risks. ERM

development was an important early feature in ACR's establishment and we view

that risk management continues to grow in importance within the company's

decision-making process.

ACR's risk culture is strong, reflecting the management's risk awareness, with

documented guidelines and limits. While an articulated risk tolerance policy

is in place, we believe further refinement is needed, given the company's

short operating history. ACR's underwriting and catastrophe risk control, as

well as its emerging risk management framework could be further developed. We

expect the company to continue to develop its strategic risk management

capabilities to complete its ERM framework.

Outlook

The stable outlook reflects our view that ACR's losses related to the floods

in Thailand have stabilized and that the company has sufficient capital buffer

to absorb further increases in claims. We believe the probability of ACR

facing losses similar to those in late 2011 are low due to the tightening of

terms and conditions on new business and higher protection of capital from

retrocession.

We may lower the ratings if ACR's capitalization deteriorates to a level that

is not supportive of the rating and if its underwriting performance weakens

due to significant underwriting losses. We may also lower the ratings if the

company's business profile deteriorates in the upcoming renewals due to

declining confidence of clients in the company.

We may upgrade ACR if its capital is extremely strong, it achieves its

business projections profitably, and its risk management is resilient to

insurance events. We consider the possibility of an upgrade to be remote for

the next two to three years.

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

-- Group Methodology, April 22, 2009

-- Summary Of Standard & Poor's Enterprise Risk Management Evaluation

Process For Insurers, Nov. 26, 2007

Source: http://news.yahoo.com/text-p-summary-asia-capital-reinsurance-group-pte-115407597--sector.html

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