HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Hong Leong Insurance (Asia) Limited (HLIA) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect HLIA’s very strong risk-adjusted capitalization, consistently profitable operating performance and low product risk profile.
HLIA maintains very strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). This is reflective mainly of its low underwriting leverage, strong quality of capital and favorable liquidity position. In addition, with a conservative gross leverage ratio, the company is not considered to be highly dependent on reinsurance.
A.M. Best expects HLIA’s underwriting performance to remain consistently positive, stemming from its portfolio of less volatile personal line product offerings. While the market for workers’ compensation business might continue to be unfavorable, HLIA has taken measures to reduce its exposure, which includes writing and retaining less workers’ compensation risks. In addition, the company has a block of personal lines policies that are large and profitable enough to compensate for weaker lines of business.
Partially offsetting these strengths are HLIA’s exposure to equity price risk and its limited market profile.
The company’s investment portfolio includes several locally listed equity securities that expose HLIA’s overall earnings (which include realized and unrealized gains and losses) to considerable equity price risk. This risk, however, is mitigated partially by HLIA holding a relatively large capital base relative to its overall equity exposure.
As a local insurer capturing only a small percentage of industry premiums, HLIA has a limited market profile. Nevertheless, the company has good market positions in some niche segments within the personal lines market, primarily in travel insurance and domestic helper insurance. In addition, a significant portion of HLIA’s new business is now sourced from direct marketing and the company’s online portal. This direct distribution capability, together with a lower commission cost structure, has it well-positioned to sustain profitable market shares in its core product lines.
Positive rating actions could occur if HLIA can demonstrate a more stable financial performance on an ongoing basis. Downward rating pressure could result if there is significant deterioration in its risk-adjusted capitalization or financial performance. Additionally, the ratings could be downgraded if there is material deterioration in the credit profile of Hong Leong Financial Group Berhad.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.