HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Luen Fung Hang Insurance Company Limited (LFH) (Macau). The outlook for each rating is stable.
The ratings reflect LFH’s favorable business profile, strong underwriting results and supportive risk-adjusted capitalization.
LFH enjoys a strong business profile in Macau as a non-life insurance company co-owned by several banks and insurance companies with a Macau, Hong Kong or mainland China background. Shareholders provide support to LFH in different areas, including a bancassurance distribution channel and risk management oversight.
LFH benefits from the high quality of business written through its bancassurance and direct channel, which has enabled steady premium growth and a consistent track record of underwriting profits over the past five years. Predominantly investing in cash and highly rated bonds, the company’s investment strategy is considered prudent and has yielded stable interest income for the company over the years.
Partially offsetting these positive rating factors is the credit quality of the company’s reinsurance panel, which includes more than one non-rated reinsurer. Under stress conditions, the company may be exposed to heightened credit and liquidity risks. In addition, the company has not composed an overall risk appetite statement or developed a risk tolerance limit for the organization as a whole that relates to its business plan and operating performance targets.
Positive rating actions could occur as a result of LFH’s continued surplus accumulation, an improved quality and diversity of its reinsurance panel and stronger risk management practices. Negative rating actions may occur if LFH’s risk-based capitalization deteriorates significantly as a result of underwriting losses, there is a deviation from the capital management plan communicated to A.M. Best or a significant deterioration in LFH’s business profile.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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