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 balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
HLIA’s balance sheet strength is supported by a risk-adjusted capitalization that is at the strongest level. In addition, with a conservative gross leverage ratio, the company is not considered to be highly dependent on reinsurance. HLIA’s investment portfolio, however, has some concentration in several locally listed equity securities, which exposes its overall earnings to considerable equity price risk. This risk is mitigated partially by the company holding sufficient excess capital relative to its overall equity exposure.
A.M. Best expects HLIA’s operating results to remain consistently positive, due to its portfolio of less-volatile personal lines product offerings. The company also has remained very selective in the type of business it chooses to write and retain. For instance, in recent years, it has reduced its exposure to workers’ compensation and continued to stay away from highly competitive product lines, such as motor insurance. A.M. Best believes the company’s strong focus on delivering profitable underwriting will help it maintain underwriting results that outperform the industry composite.
HLIA has good market positions in some niche segments within the local insurance market, primarily in travel insurance and domestic helper insurance. In addition, a significant portion of the company’s new business is now sourced from direct marketing and the company’s online portal, both of which contribute to its lower commission cost structure. Nevertheless, HLIA’s small market share and narrow product offerings have constrained its business profile assessment.
A.M. Best views HLIA’s ERM to be appropriate, based on the company’s current size and risk profile. This is supported by its strong focus on profitable underwriting and prudent reinsurance strategy. A.M. Best thus considers HLIA’s risk management capabilities to be aligned appropriately with its risk profile.
Positive rating actions could occur if HLIA can significantly improve its market position while maintaining its strong operating 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 HLIA’s parent company, 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.
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