Singapore-Based Insurance Company of Trinet Asia Assigned #A/A-1# Outlook Negative

Stocks and Financial Services Press Releases Friday May 19, 2017 17:42
TOKYO--19 May--S&P Global Ratings

TOKYO (S&P Global Ratings) May 19, 2017--S&P Global Ratings today said it has assigned its 'A' financial strength and long-term counterparty credit ratingsto Singapore-based Insurance Company of Trinet Asia Pte Ltd. (ICTA). At the same time, we have assigned our 'A-1' short-term counterparty credit rating to the captive insurance company of the Mitsui & Co. group (Mitsui). The outlook on both the financial strength and long-term counterparty credit ratings is negative.

We base the ratings on our view that ICTA is a core subsidiary of Mitsui. ICTA's operations are integrated into the group and its function is integral to the group's risk management strategy. We assess the group's credit profile as 'a', based on the credit quality of Mitsui & Co. Ltd., a Japan-based general trading and investment company. We equalize our long-term counterparty credit rating on ICTA with Mitsui's group credit profile.

ICTA was established in 1991 in Singapore, with 91% of its shares owned by Mitsui. From 2009, ICTA became wholly owned by Mitsui, operating as the group's captive insurer. In our view, there is a high likelihood that the insurer will not expand its business outside the group. ICTA's operations are integrated into the operations and the risk management strategy of Mitsui. The insurer supports Mitsui by managing insurance risk and handling risk financing for the group's companies. ICTA also helps to reduce its parent's insurance costs and contributes to the group's consolidated profits by generating underwriting profits.

ICTA's reinsurance portfolio mainly comprises marine cargo insurance from Mitsui through primary insurers, making up more than 80% of its net premiums written in fiscal 2015 (ended March 31, 2016). ICTA also underwrites insurance such as commercial general liability insurance, directors and officers liability insurance, umbrella liability insurance, commercial credit insurance, personal accident insurance, workers compensation insurance, and insurance for Mitsui's overseas energy-related projects. ICTA's premium income is subject to its reinsurance underwriting policy and Mitsui's business volume. However, the insurer's loss ratio has remained relatively low over the last several years and it will likely maintain stable profitability, in our view.

ICTA's capitalization is strong, in our opinion. The insurer has enhanced its capital by accumulating profits under its risk management and underwriting policy to cautiously expand underwriting of insurance risks for the group companies of Mitsui. We also consider ICTA's reinsurance policies to be conservatively retroceded to reinsurers. This helps ICTA to earn stable profits and supports its strong capitalization.

The outlook on our financial strength and long-term counterparty credit ratings on ICTA is negative, reflecting the outlook on our long-term rating on its parent. The negative outlook indicates a one-in-three chance that we will lower the ratings within two years. If we revise the outlook on Mitsui upward to stable, we would also consider revising the outlook on ICTA to stable. On the other hand, if we lower the ratings on Mitsui, we would also consider downgrading ICTA.

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