Hong Kong, July 27, 2012 -- Moody's Investors Service has assigned A2 local and foreign currency
insurance financial strength (IFS) ratings to four members of Chartis
in Asia Pacific (APAC). The rated companies are Chartis Singapore
Insurance Pte Ltd (Chartis Singapore), Chartis Australia Insurance
Ltd (Chartis Australia), Chartis Insurance Hong Kong Ltd (Chartis
Hong Kong) and Chartis Taiwan Insurance Co Ltd (Chartis Taiwan).
The rating outlook for these companies is stable. Chartis is the
global property & casualty (P&C) business of American International
Group, Inc. (NYSE: AIG -- senior unsecured debt
Baa1 stable).
Chartis Singapore and its subsidiaries (collectively, Chartis APAC)
write P&C insurance products in various countries within the APAC
region, excluding Japan. Chartis APAC contributed about 6.3%
of Chartis's consolidated worldwide net premiums in 2011.
Chartis is gradually shifting its geographic mix toward international
markets, particularly high-growth markets like APAC.
Chartis APAC is completing an organizational realignment through which
Chartis Singapore is expected to ultimately become the parent of all Chartis's
operating subsidiaries in the region. All rated APAC entities covered
by this press release are currently subsidiaries of Chartis Singapore.
RATINGS RATIONALE
In assigning ratings to these four insurers, Moody's assessed
the stand-alone business and financial profiles of each,
and determined that their stand-alone credit profiles were clustered
in a range at or just below the assigned A2 rating levels.
Moody's has aligned the IFS ratings of these companies at A2 to
reflect Chartis Singapore's ownership and implied support,
as well as the benefits of being part of Chartis. The alignment
considers the increasing integration within the APAC operations and within
Chartis globally.
The APAC operations share key attributes with the wider Chartis organization,
including common branding, risk management, underwriting strategy
and management resources. Further, we believe that AIG will
ensure a solid level of capital at each of the APAC subsidiaries,
while also maintaining flexibility of capital within the overall Chartis
group. We expect AIG to contribute capital to and receive dividends
from its insurance subsidiaries so as to keep the subsidiary capitalization
at target levels.
The rating rationale for each subsidiary is discussed below.
Chartis Singapore -- A2 Insurance Financial Strength
Chartis Singapore is the current parent of some, and is expected
to be the future parent of all, of Chartis's APAC subsidiaries.
Moody's A2 IFS rating reflects the aggregate credit profile of all
the subsidiaries owned by Chartis Singapore as well as its Singaporean
P&C business.
On a consolidated basis, Chartis APAC is the leading foreign-owned
insurer in several markets and enjoys good brand recognition. The
group is especially strong at writing commercial lines for multinational
accounts, given Chartis's extensive footprint and history
as a global insurer. Chartis APAC has good diversification in terms
of distribution channels, product lines and geographic areas within
Asia. It also has solid capitalization overall and at its main
subsidiaries.
On the other hand, a number of considerations constrain Chartis
APAC's credit profile. First, its profitability has
been weak and volatile in certain markets, such as Australia,
New Zealand and Taiwan, due to restructuring and catastrophe losses.
Second, it has relatively high product risk on a gross basis due
to its focus on large-limit commercial lines and long-tail
casualty business in certain markets. Third, its expense
ratio has been relatively high compared to regional peers, partly
due to internal cost allocations. Fourth, it has significant
gross catastrophe exposures in certain markets, such as Australia,
New Zealand, Taiwan and Thailand, notwithstanding the significant
intercompany reinsurance programs that mitigate these exposures for local
statutory purposes.
Within the Singaporean P&C market, Chartis Singapore enjoys
a leading market position and a low product risk profile. The company
has achieved favorable underwriting results while maintaining strong capitalization.
These strengths are tempered by its relatively volatile profitability
from investment losses during the financial crisis, and by competitive
market conditions in Singapore, which could place negative pressure
on underwriting margins.
The Chartis APAC ratings are one notch below those of Chartis's
leading US and European companies (IFS ratings A1 stable), reflecting
Chartis APAC's modest share of Chartis's global business as
well as Chartis Singapore's short track record as the APAC hub.
Moody's expects Chartis APAC's share of the global business
to expand over the next several years.
Chartis Australia -- A2 Insurance Financial Strength
Moody's A2 IFS rating of Chartis Australia is based on the company's
leading position in providing commercial lines insurance to corporate
and multinational accounts in Australia, its strong capitalization
and its conservative investment portfolio. The company's
reserving practice has been conservative, leading to consistent
favorable development in the past few years.
These strengths are offset by the company's modest market position
in Australia, whose P&C market is highly concentrated.
In addition, the firm's profitability has been volatile due
to underwriting losses related to catastrophe events and financial lines
during the global financial crisis, although the volatility is tempered
by intercompany reinsurance treaties. Because of the competitive
nature of the Australian P&C market, Moody's expects that
underwriting margins will be constrained and growth opportunities will
be limited.
Chartis Australia's A2 IFS rating benefits from a one-notch
uplift versus its intrinsic credit profile, reflecting implied support
from its parent, Chartis Singapore.
Chartis Hong Kong -- A2 Insurance Financial Strength
Moody's A2 IFS rating of Chartis Hong Kong is based on the company's
good market position in Hong Kong, good underwriting profitability,
solid capitalization and conservative investment portfolio. These
strengths are offset by the company's high gross and net catastrophe
exposures relative to capital. In addition, its reserve development
has been volatile, which raises uncertainty as to the stability
of its reserves going forward.
Chartis Hong Kong's IFS rating matches its stand-alone credit
profile, which is consistent with that of its parent, Chartis
Singapore.
Chartis Taiwan -- A2 Insurance Financial Strength
Moody's A2 IFS rating of Chartis Taiwan reflects its strong capitalization,
good product diversification and low-risk product profile,
as well as improved asset quality in its investment portfolio from the
reduced holdings of equity and real estate investments. Its underwriting
performance has also improved in the past two years.
However, the company's market presence in Taiwan has been
shrinking due to management's conscious efforts to exit certain
unprofitable businesses. In addition, its profitability has
been volatile due to impairment losses on investments prior to 2010.
Further, the company has significant gross and net catastrophe exposures
relative to capital. Its largest event risk is earthquakes in Taiwan.
AIG's 2011 sale of Nan Shan Life Insurance Co Ltd, a domestic
life insurer, may disrupt some distribution efforts of Chartis Taiwan,
which currently relies on Nan Shan agents to sell auto insurance.
Chartis Taiwan's A2 IFS rating incorporates a two-notch uplift
versus its intrinsic credit profile, reflecting implied support
from its parent, Chartis Singapore.
RATING DRIVERS
Please refer to the individual Credit Opinion of each of the above subsidiaries
for a list of factors that Moody's would consider for a rating upgrade
or downgrade.
RATING METHODOLOGIES
The principal methodology used in these ratings was Moody's Global Rating
Methodology for Property and Casualty Insurers published in May 2010.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
ABOUT THE COMPANIES
Headquartered in Singapore, Chartis Singapore Insurance Pte Ltd
is the lead P&C insurance company for Chartis APAC and a diversified
personal and commercial insurer within the Singapore market. It
is the parent of most of Chartis's APAC insurers, and is expected
to assume ownership of the group's remaining APAC insurers.
At year-end 2011, total assets and shareholders' equity
were SGD6.5 billion and SGD1.7 billion, respectively.
Headquartered in Sydney, Australia, Chartis Australia Insurance
Ltd is a P&C insurer, offering financial lines, property,
accident & health, marine & energy, and liability
insurance, among other lines. At year-end 2011,
total assets and shareholders' equity were AUD2.6 billion
and AUD564 million, respectively.
Chartis Insurance Hong Kong Ltd is a P&C insurer offering liability,
accident & health, personal lines and marine & energy insurance,
among other lines. At year-end 2011, total assets
and shareholders' equity were HKD4.0 billion and HKD978 million,
respectively.
Headquartered in Taipei, Taiwan, Chartis Taiwan Insurance
Co Ltd is a P&C insurer offering auto, marine & energy,
liability, accident & health, and financial lines insurance,
among other lines. At year-end 2011, total assets
and shareholders' equity were TWD13.8 billion and TWD2.8
billion, respectively.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare each of the ratings are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
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for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
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the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Stella Ng
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
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Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
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Moody's rates Chartis Asia Pacific insurers A2 for financial strength
