AM Best Upgrades Issuer Credit Rating of MS First Capital Insurance Limited
AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to a+ from a and affirmed the Financial Strength Rating of A (Excellent) of MS First Capital Insurance Limited (MSFC) (Singapore).
AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a+” from “a” and affirmed the Financial Strength Rating of A (Excellent) of MS First Capital Insurance Limited (MSFC) (Singapore). The outlook of these Credit Ratings (ratings) is stable.
These ratings reflect MSFC’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also reflect the implicit support from the company’s ultimate parent, MS&AD Insurance Group Holdings, Inc. (MS&AD).
The Long-Term ICR upgrade reflects the increased level of implicit support that MSFC receives from its parent. In particular, the company has assumed more premium from MS&AD’s affiliates and there has been closer integration between MSFC and the group in terms of governance, management structure, as well as in key business functions.
The company’s risk-adjusted capitalisation remained at the strongest level in 2019, as measured by Best’s Capital Adequacy Ratio (BCAR). MSFC’s balance sheet strength is also supported by the company’s low underwriting leverage and very conservative investment portfolio, which is composed mostly of cash, deposits and high-grade bonds. Over the past five years (2015-2019), capital accumulation has outpaced net premium growth substantially, underpinned by the company’s strong and fully retained earnings. While MSFC paid a SGD 34.875 million dividend to the parent during the first six months of 2020, the capital remains more than sufficient to support business growth over the medium term. MSFC underwrites large and complex risks such as commercial properties and infrastructure projects, resulting in a considerable reliance on reinsurance protection; however, this is partially mitigated through a reinsurance panel of excellent credit quality.
MSFC has outperformed domestic and regional peers over many years, with a track record of strong operating performance as evidenced by a five-year average return-on-equity and combined ratio of 12% and 71%, respectively. Positive performance has been sustained through the management's proven expertise in risk selection and adherence to strict pricing discipline. Furthermore, management efficiency and favorable reinsurance commission income have enabled the company to maintain its low-cost operations for a long period. Although AM Best expects future results to remain strong, the company may face some pressure from lower investment yield.
MSFC is a dominant non-life insurer in Singapore with a leading market position in fire and marine business. In addition to achieving higher domestic premium growth in recent years despite the overall market’s stagnation, the company has been able to find new opportunities overseas where it generates the majority of its gross premiums. While MSFC continues to benefit from the strengths of its management team, institutionalising these strengths, with support from the parent, could enhance the company’s growth potential in the long run.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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