TEXT-S&P summary: Tenet Sompo Insurance Pte. Ltd.

(The following statement was released by the rating agency)

Jan 02 -

==============================================================================

Summary analysis -- Tenet Sompo Insurance Pte. Ltd. --------------- 02-Jan-2013

===============================================================================

CREDIT RATING: None. Please see issue list. Country: Singapore

Primary SIC: Fire, marine, and

casualty

insurance

===============================================================================

Financial Strength Rating History:

23-Feb-2012 A

30-Jun-2002 A+

===============================================================================

Rationale

The rating on Tenet Sompo Insurance Pte. Ltd. (Tenet SJ) reflects the

insurer's strategic importance to the Asia business of its parent, Sompo Japan

Insurance Inc. (Sompo Japan: local currency A+/Stable/--). The rating also

reflects Tenet SJ's moderately strong investment profile with good quality

fixed income and good liquidity. The insurer's weakened operating performance,

limited competitive position within Singapore's fragmented non-life insurance

market, and significant reliance on reinsurance temper the above strengths.

Our rating on Tenet SJ factors in three notches of support over the company's

stand-alone credit profile but is a notch lower than the parent group rating.

Tenet SJ receives explicit support from Sompo Japan through a net worth

maintenance agreement under which the parent will maintain a

higher-than-minimum regulatory solvency. However, our view on explicit parent

support has changed to a "less strong" commitment from "strong" commitment.

This is because, following the Thai floods, the company was unable to restore

its capitalization to the level agreed under the net worth agreement for more

than six months between 2011 and early 2012.

Tenet SJ demonstrates its strategic importance to Sompo Japan by providing

insurance support to the group's key clients that have operations in Asia. The

insurer is highly integrated with its parent through the latter's regional

office--Sompo Japan Asia Holdings Pte. Ltd. Tenet SJ benefits from business

referrals and technical support in areas of underwriting and investment from

Sompo Japan. It also continues to provide underwriting capacity to other Sompo

Japan subsidiaries in Asia through various inward reinsurance programs.

However, given the effects of the Thai flood losses, we believe the company's

overall business profile has become riskier due to potential catastrophe

exposure.

Tenet SJ's capitalization has weakened significantly after the Thai flood

losses based on our capital analysis. This is because we factor in an

increased catastrophe risk charge in our analysis. We now consider the

insurer's capitalization as satisfactory compared with our earlier assessment

of strong. Capitalization became vulnerable immediately after the losses.

However, the company was able to bolster capitalization through reinsurance

recoverables, parent support, and the profit generated over the past year.

Tenet SJ's regulatory solvency, which is about 240%, has nearly recovered to

the pre-flood losses level. The company's reliance on reinsurance remains

high, with a cession rate of over 70% since 2011 compared with about 50%-57%

in the previous years. Tenet SJ's high net losses in the past year underscore

its insufficient reinsurance coverage for catastrophe risk. Nevertheless, the

company's reinsurance coverage has improved following a reinsurance program in

2012.

Tenet SJ's investment allocation is satisfactory, in our view. Nearly most of

its invested assets are in fixed-interest income assets: cash deposits,

highly-rated bond investments, and money market funds (totally about 98% of

invested assets as of Dec. 31, 2011). We consider the insurer's investment

portfolio as liquid, providing a good match between its assets and relatively

short-tailed liabilities.

We view Tenet SJ's operating performance as adequate, despite poor performance

over the past year due to the Thai flood losses. The insurer's combined ratio

was above 1000% in 2011. We expect this ratio to be within 100% in 2012 and

2013. The Japanese business, which accounts for 70% of the company's total

business, was also negatively affected by the Thai floods because of the

losses to Japanese interests in Thailand.

Tenet SJ's modest size in the local non-Japanese related business within the

competitive Singapore non-life insurance market is a rating weakness. However,

its niche position in servicing the Japanese corporate accounts moderates this

weakness. The insurer had a 1.2% market share of premiums in 2011, and its

market share increased to 3% following the company's merger with the erstwhile

Tenet Insurance Co. Ltd. While the merger has significantly improved Tenet

SJ's competitive position, its size remains modest.

Enterprise risk management

Tenet SJ's enterprise risk management (ERM) is adequate, in our opinion. The

insurer has adequate risk controls despite a traditional risk management

approach. We also believe the insurer's risk control culture is prudent. An

independent risk management committee reports to the board each quarter. The

risk management framework originated from an external vendor and was

customized to cater to Tenet SJ's risk profile. The Thai flood experience has

tested the effectiveness of the company's ERM. We view Tenet SJ's catastrophe

risks, emerging risks, and reinsurance control as weak compared with its

adequate overall ERM score. The insurer stringently adheres to its internal

control framework and has a focused approach to monitoring its risk profile.

Outlook

The stable outlook on Tenet SJ reflects the outlook on the ratings on Sompo

Japan, given the explicit support Tenet SJ receives from the parent, and its

strategic importance to the group. We expect Tenet SJ's stand-alone credit

profile to remain stable over the next two years supported by its satisfactory

capitalization and overall financial profile. However, the insurer's business

profile could constrain its stand-alone credit profile. We expect Tenet SJ's

underwriting performance to remain satisfactory over the next two years,

despite the significant deterioration in the past year.

We could raise the rating if Tenet SJ's stand-alone credit profile improves

because of capitalization and consistently good operating performance and we

upgrade the parent group. However, this is unlikely to happen over the next

12-24 months.

We may lower the rating if Tenet SJ's strategic importance to the wider group

wanes or its own stand-alone credit profile deteriorates due to unexpectedly

poor underwriting performance.

Related Criteria And Research

-- Sompo Japan Insurance (Singapore) Rating Unaffected By Proposed Merger

With Tenet Insurance, Jan. 2, 2013

-- Refined Methodology And Assumptions For Analyzing Insurer Capital

Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010

-- Group Methodology, April 22, 2009

-- Interactive Ratings Methodology, April 22, 2009

Source: http://news.yahoo.com/text-p-summary-tenet-sompo-insurance-pte-ltd-084428261--sector.html

grammy winners obama budget woolly mammoth belize resorts nikki minaj grammy performance shel silverstein niki minaj grammy performance