Life insurers' capital adequacy ratios well above minimum requirement

Singapore

THE tables have turned for some of the nine major life insurers here in terms of their financial strength for 2014.

Those that previously reported lower capital adequacy ratios (CARs) have turned their fortunes around, while others continued on their downward trend. Still, all nine insurers have CARs way above mandatory requirement.

The current minimum requirement for CAR, a buffer to absorb losses, is determined by regulators at 120 per cent to guard against insurers' insolvency.

Changes in investment strategy, the business written, or shareholder dividends, among other things, would have an impact on the level of buffers.

Axa Life Singapore's buffer leaped from 2013's 219 per cent to 315 per cent in 2014. It recorded the highest jump and was the insurer with the highest CAR among the group.

Axa's spokesperson could not be reached for comment.

Based on the returns filed, HSBC Insurance recorded the second highest jump to 285 per cent from 224 per cent previously.

For 2014, AIA Singapore recorded the steepest decline to 213 per cent from 288 per cent in 2013.

Prudential Singapore recorded the second steepest fall to 212 per cent from 252 per cent the year before.

AIA Singapore said that its level of CAR varies over time, depending on factors such as the financial markets and business performance.

"AIA Co, the group's principal operating company, is amongst the strongest life insurers in the world with its 'AA-' S&P rating and solvency ratio of 427 per cent as of Nov 30, 2014," said the insurer, adding that AIA Singapore was rated "AA-" by Standard and Poor's (S&P).

For the third year running, Great Eastern Life's CAR ranked at the bottom. In 2014, it was 208 per cent, down from 218 per cent a year ago.

The company pointed out that its CAR was still "well above the minimum regulatory ratio", reflecting its strong capital position.

"In addition to capital held at the operating entity level (Great Eastern Life Singapore) to meet regulatory requirements, capital is also held at the holding company (Great Eastern Holdings Limited) to meet the requirements on an economic basis and the effect of the additional capital at Great Eastern Holdings is not visible in the CAR of Great Eastern Life Singapore. Our 'AA-' rating by S&P for five consecutive years since 2010, is an attestation of our sound financial position, strong capital and prudent approach to risk management," it added.

There are about 20 life insurers here of which several are new entrants such as China Life and Etiqa, while the others serve a niche segment of the market.