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 Wing Lung Insurance Company Limited (WLI) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect WLI’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, neutral business profile and marginal enterprise risk management (ERM).
WLI is well-capitalized as measured by Best’s Capital Adequacy Ratio (BCAR). Its capital and surplus grew organically in the past five years, underpinned by full retention of operating profits and low underwriting leverage. The company has a track record of profitable underwriting results in Hong Kong’s highly competitive non-life insurance market. It continues to outperform its domestic peers in the commercial lines sector. In addition, the company maintains a liquid and diversified investment portfolio, which generates stable and favorable investment income from bank deposits and bonds.
With over 30 years of operation in Hong Kong, WLI has built up long-term relationships with clients and brokers in the domestic market. The company’s book of business is concentrated in the competitive commercial lines, where the premium growth was suppressed due to prolonged soft market conditions. Nevertheless, the company is diversifying its portfolio into personal lines by leveraging the bancassurance channel of its parent, Wing Lung Bank, which is one of the oldest domestic banks in Hong Kong.
Offsetting rating factors include the company’s emerging risk management framework and investment risks. The company recently made an effort to establish a risk committee in compliance with the Insurance Authority’s requirements, set its risk appetite and identify different types of risks with mitigation plans. A.M. Best expects the adoption and integration of the new ERM framework is a work in progress. In regard to investment risks, WLI has a relatively high proportion of non-rated bonds in its investment portfolio, which adds potential volatility to the company’s investment earnings and capitalization.
Positive rating actions could occur if WLI continues to demonstrate improvement in enterprise-wide risk management, while maintaining robust risk-adjusted capitalization and favorable operating performance. Negative rating actions could occur if the company’s risk-adjusted capitalization deteriorates materially due to adverse underwriting or investment loss, or if the company’s business profile is notably weakened.
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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