SINGAPORE - Rating agency AM Best has downgraded the financial strength rating for ECICS (Singapore) to "B++" (good) from "A-" (excellent).
It has also lowered the long-term issuer credit rating for the company to "bbb+" from "a-", and revised the outlook of the credit ratings to stable from negative.
ECICS is the wholly owned insurance unit of mainboard-listed IFS Capital, a financing specalist for small and medium-sized enterprises.
AM Best said in a statement on Feb 10 that the ratings downgrades were driven by an increased combined ratio that compared unfavourably with the industry average, negatively impacting results in recent years.
"Since 2015, competition has eroded profitability in ECICS's core credit insurance, bonds and guarantee business lines," it said.
"In response, ECICS has introduced various initiatives to seek growth in new lines of business. The results to date, however, have not met expectations, and a turnaround in the company's performance has yet to materialise."
Underpinning ECICS' ratings is its balance sheet strength, which AM Best categorises as strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.
AM Best expects the company's balance sheet strength will remain at a strong level over the near term, supported by low underwriting leverages and good asset quality.
Positive rating actions are unlikely in the near term, while negative rating actions may occur if there is further deterioration in the company's operating performance or business profile, it said.