(The following statement was released by the rating agency)
Dec 10 -
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Summary analysis -- Overseas Assurance Corp. Ltd. ----------------- 10-Dec-2012
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CREDIT RATING: Country: Singapore
Local currency A+/Stable/--
Primary SIC: Fire, marine, and
casualty
insurance
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Credit Rating History:
Local currency Foreign currency
31-Mar-2011 A+/-- --/--
19-Mar-2002 NR/-- --/--
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Rationale
The local currency counterparty credit rating on Overseas Assurance Corp. Ltd.
(OAC) reflects strong implicit support from the company's parent, Great
Eastern Holdings Ltd. (GEH; not rated), given OAC's strategically important
role to the wider group's insurance franchise within Singapore and Malaysia.
We also consider OAC's financial profile to be robust, given the insurer's
strong capitalization and above-average operating performance. OAC's small
non-life insurance franchise and concentrated exposure to some equity
investments moderate these strengths.
OAC's strategic importance to its parent company is shown in that it accounted
for about 8.8% of GEH's assets in 2011 and 17% of its capital. Life insurance
assets formed 77% of OAC's total assets while non-life insurance assets made
up the remaining 23%. OAC's life portfolio has gradually reduced since 2009
following the group's realignment of the bancassurance distribution strategy,
with OAC's sister company, The Great Eastern Life Assurance Co. Ltd. (local
currency AA-/Stable/--; axAAA/--), playing a greater role. As a subsidiary of
GEH, OAC receives implicit parent support in investments, human resource, IT,
finance, actuarial, and risk management functions.
OAC's capitalization is supportive of the rating, with market risk from equity
holdings contributing the most to the company's capital requirements.
Investment risk heavily drives the company's capital model results, given the
size of OAC's life insurance portfolio relative to its general insurance
portfolio. We do not expect this risk level to substantially change in the
near future.
OAC's satisfactory operating performance reflects the strong underwriting
results of its non-life portfolio and stable investment yields over the past
four years. We expect the insurer's underwriting performance to remain
profitable, although the company's inclusion of liabilities from an acquired
motor portfolio will likely be a drag on its combined ratios over the next few
years.
We expect non-life insurance to remain an important part of OAC's product
offering. The operating results of the non-life business have improved over
the past few years, relative to its life operations. Return on assets for
OAC's life insurance portfolio was 0.5% in 2011, a level that we consider
moderate. This ratio reflects OAC's slower accumulation of profits in its
large portfolio of "participating" insurance (in which policyholders receive a
share of surplus earnings). The participating fund accounted for 91% of OAC's
life insurance funds by total assets as of Dec. 31, 2011.
OAC has lowered the risk in its participating fund through substantially
reducing its equity holdings. However, the company continues to have
significant equity investments in other funds. The insurer has large long-term
holdings in some companies, exposing OAS to concentrated investment risk.
Nevertheless, the company's overall investment quality is good, in our view,
with sound liquidity. About 69% of OAC's invested life insurance assets in
2011 comprised bonds and cash. Holdings of liquid assets have remained high
this year.
Enterprise risk management
We consider GEH's enterprise risk management (ERM) as "adequate with strong
risk controls." GEH adopted an ERM framework early and has a strong risk
management culture and an ability to articulate its risk appetite. The strong
risk analytics enable the group to manage its risk exposure effectively.
OAC's life portfolio is fully integrated into the group's risk management
framework. Nevertheless, risk management in non-life operations is still
silo-based and less sophisticated. We believe the insurer's still-developing
strategic risk management framework would strengthen over time, in line with
ERM developments in the group.
Outlook
The stable rating outlook reflects our view that OAC will maintain its
strategic importance to the GEH group and that implicit support from GEH will
remain strong. We expect OAC's life insurance portfolio to reduce gradually.
We also expect its non-life business to grow in Singapore and Malaysia due to
increased business volume from brokers, deeper penetration in corporate and
personal bancassurance, and direct sales. We believe the company will maintain
a strong capital position, with above-average operating performance, robust
financial flexibility, and a good liquidity profile.
We may raise the rating if we consider OAC to be a core entity in the group.
We may lower the rating if the company's operating performance deteriorates
unexpectedly or its capital position weakens significantly. We may also lower
the rating if OAC's relationship with the GEH group wanes, although we believe
that possibility is remote.
Related Criteria And Research
-- Group Rating Methodology And Assumptions, Nov. 9, 2011
-- 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
-- Hybrid Capital Handbook: September 2008 Edition, Sept. 15, 2008
-- Summary Of Standard & Poor's Enterprise Risk Management Evaluation
Process For Insurers, Nov. 26, 2007
Source: http://news.yahoo.com/text-p-summary-overseas-assurance-corp-ltd-072248696--sector.html
reggie wayne taylor allderdice vincent jackson vicki gunvalson pierre garcon brown recluse spider wiz khalifa taylor allderdice
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