The operating performance of Singapore-based non-life insurer, United Overseas Insurance (UOI), is very strong, supported by exceptionally strong and consistent underwriting results, which have led to highly stable overall earnings over time, said AM Best.
Overall net profit increased by 55% in 2023, primarily due to better investment returns. UOI’s underwriting performance remained highly profitable in 2023 given its low loss ratio and favourable reinsurance commissions. The company’s investment returns remain favourable and are an important contributor to overall earnings.
Ratings affirmed
AM Best has affirmed UOI’s Financial Strength Rating of ‘A+’ (Superior) and the Long-Term Issuer Credit Rating of ‘aa-’ (Superior). The outlook of these credit ratings is ‘Stable’.
The ratings reflect UOI’s balance sheet strength, which AM Best assesses as very strong, as well as its very strong operating performance, neutral business profile, and appropriate enterprise risk management. In addition, UOI’s ratings factor in rating enhancement from the company’s ultimate majority ownership by, and importance to, United Overseas Bank (UOB), a leading banking corporation in Asia.
Balance sheet strength
UOI’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which is expected to remain comfortably at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR).
UOI has demonstrated good internal capital generation over time. The company’s shareholders' equity increased by 5.9% in 2023 due to unrealised investment gains and its good internal capital generation.
AM Best views UOI’s investment portfolio to have moderate risk, comprising mainly high-quality fixed-income securities, cash, and deposits, albeit with a moderate exposure to equity investments. A partially offsetting balance sheet strength factor remains the company’s reliance on reinsurance usage, which enables the underwriting of large limit risks.
Nonetheless, AM Best views the company’s reinsurance management strategy as appropriate to mitigate balance sheet volatility arising from large loss and catastrophe losses, and its credit risk is mitigated by a reinsurance panel that consists of well-rated counterparties.
Business profile
As the sole insurance subsidiary of UOB, UOI benefits from cross-selling insurance policies to UOB customers. The company’s affiliation with its banking parent enables good access to business through the bancassurance channel. UOI’s underwriting portfolio remains focused predominantly in Singapore, whereby approximately three-quarters of gross premium is sourced locally. Regional business expansion over the medium term is expected to be aligned with opportunities arising in connection with the group’s strategy.