Asia Capital Re keeps A- ratings but AM Best warns on “record of not meeting targets”

Two of the major rating agencies have reaffirmed the financial strength rating of Asia Capital Re in the aftermath of its parent, ACR Capital Holdings, being acquired by Chinese investment companies Shenzhen Qianhai Financial Holdings and Shenzhen Investment Holdings.

Both Standard & Poor’s and AM Best have reaffirmed its A- financial strength rating following annual reviews but the latter has assigned it a negative outlook and highlighted concerns around the underwriting performance of the business.

While AM Best affirmed its A- financial strength rating highlighting Asia Capital Re’s strong risk-adjusted balance sheet, low underwriting leverage and good asset quality, it also revised its outlook from stable to negative on the basis of the reinsurer’s record of underwriting performance.

“The assigned negative outlooks of Asia Capital Re reflect its continued underwriting losses and concerns about the execution risk related to its turnaround strategy. The ratings and outlooks of ACRM consider the expected integration of the company into Asia Capital Re,” AM Best said.

It also noted that Asia Capital Re’s combined ratio remains elevated. “Historically, the company has had a record of not meeting its performance targets. Its new management team has presented a detailed strategy to remediate underwriting performance and implemented initiatives to improve disclosure. However, concerns remain about execution risk.”

S&P’s A- rating has been assigned a stable outlook. The rating agency said it expects that ACR’s new ownership will not materially impact Asia Capital Re’s autonomy in its business, underwriting, investment and capital management strategies.

S&P also stated that it expects Asia Capital Re’s “extremely strong capital adequacy”, “satisfactory business risk profile” and stable competitive position to be maintained, supported by its “selective growth strategy and high reinsurance utilisation”.

Hans-Peter Gerhardt, ACR Group chief executive, said: “We are very pleased with the recognition of Asia Capital Re’s robust financial strength by both rating agencies as evidenced by their reconfirmation of our A- ratings. It is clear that ACR’s solvency strength is not in any doubt by either rating agency.

“The process pertaining to the proposed acquisition of ACR is progressing within our expectations, including applications for approvals from other required regulatory bodies. All parties will target expeditious completion once all key approvals have been received.”

Gerhardt added that the company’s priority now, as the January renewals approach, is to ensure service consistency and continuity for our clients.

“This unwavering client commitment gained ACR the support of a strong core of long-term business partners in Asia over the past 10 years. Our incoming owners, QFH and SIHC, deeply share this commitment and together with ACR, are looking forward to contributing towards Asia’s risk solutions landscape for many years to come.”