Chubb Insurance Singapore Ltd. #AA-# Rating Affirmed With Stable Outlook

Stocks and Financial Services Press Releases Monday October 16, 2017 17:30
SINGAPORE--16 Oct--S&P Global Ratings

SINGAPORE (S&P Global Ratings) Oct. 16, 2017--S&P Global Ratings today affirmed its 'AA-' local currency long-term counterparty credit rating and financial strength rating on Chubb Insurance Singapore Ltd. (Chubb Singapore). The outlook remains stable.

The financial strength rating on Chubb Singapore reflects our view of the insurer's highly strategic role to the Chubb group (Chubb Ltd.; core operating subsidiaries rated AA/Stable/--). We rate highly strategic subsidiaries one notch below the core operating subsidiaries.

S&P Global Ratings considers Chubb Singapore a highly strategically important subsidiary to Chubb group's regional business strategy. Chubb Singapore benefits from sharing the group's brand and strategy and cedes a portion of its premiums to a reinsurance subsidiary under the group. Chubb Singapore's contribution to the group's capital and earnings is not significant--less than 5%. That limits the insurer's group status to highly strategic.

Chubb Singapore is focusing on further diversifying its portfolio across segments after the inclusion of the financial lines from legacy Chubb. The company is also focused on growth in its other segments (property and casualty, accident and health lines), excluding motor and treaty lines.

In 2016, Chubb Singapore ranked sixth with a 4.2% market share in the competitive Singapore non-life insurance market and maintained stable underwriting results. We believe the 15-year regional distribution partnership Chubb Singapore recently signed will gradually strengthen the company's market share because it will benefit from the large customer base and sizable footprint in the region. However, we expect the competitive position to remain adequate in the near term, because it is unlikely for Chubb Singapore to aggressively increase its market share due to its consistent focus on maintaining underwriting profitability. We believe the company will continue to focus on property and casualty, financial lines, and accident and health.

We have a positive view on Chubb Singapore's operating performance. Prior to the merger of ACE Insurance Ltd. (Singapore) and Federal Insurance Co. (Singapore Branch) to form Chubb Singapore, their combined ratios were generally lower than that of domestic peers'. In 2016, the combined ratio for Chubb Singapore benefitted from merger-related cost efficiencies due to product, system, and operations synergies. We expect Chubb Singapore to maintain a combined ratio of 80%-85%, reflecting its focus on underwriting and ability to maintain lower loss ratios similar to that before the merger.

In our view, Chubb Singapore's capitalization has further strengthened post its merger with legacy Federal Insurance Co. (Singapore Branch). Nevertheless, Chubb Singapore's capital base of about Singapore dollar 146 million as of year-end 2016 moderates its extremely strong capital adequacy. In our base case, we expect Chubb Singapore to maintain a strong capital and earnings position over the next two years.

We view Chubb Singapore's risk position as intermediate. We consider the insurer's investment leverage to be conservative as it invests primarily in cash and fixed-interest investments.
The stable outlook on Chubb Singapore reflects the rating outlook on core entities of the Chubb group and our view that the insurer will remain a highly strategic subsidiary of the group.

We may lower the rating on Chubb Singapore if we lower the ratings on the group or if the company's strategic relationship with the group weakens. This could be due to deterioration in Chubb Singapore's operating performance or a change in the group's strategic focus, which we view as unlikely over the next 12-24 months.

We may upgrade Chubb Singapore if we consider it to be core to the group, indicating a strengthening of the company's strategic relationship with the group. This strengthening could be reflected through a higher level of integration with the group in areas such as product development and strategy. Another indication of the strengthening is the company's growth in its share of the Singapore insurance market while maintaining underwriting profitability.

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