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 China Merchants Insurance Company Limited (CMI) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CMI’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the parental support from China Merchants Group Limited (CMG).
CMI’s risk-adjusted capitalization remained sound in 2017, as a combined result of a capital injection totaling HKD 207 million from its parent, CMG, in 2016, and the continued low asset risk exposure and low underwriting leverage.
CMI has delivered modestly positive operating results over the past few years, attributed to the favorable investment performance driven by a stable stream of interest and coupon income, which offset the continued underwriting losses due to its higher-than-average, albeit gradually improving expense ratio. CMI maintains a diversified yet small underwriting portfolio in Hong Kong’s non-life market, with a majority of premiums sourced from personal-line products. By leveraging the parent group’s well-established brand and continued financial support, CMI aims to further diversify its book of business into commercial lines, in particular the marine business.
Offsetting rating factors include the above average expense ratio, and the highly competitive and fragmented operating environment in Hong Kong’s non-life segment. Execution risk in its business transformation plan also may give rise to uncertainties such as volatility in claims experience.
While positive rating actions are not likely, negative rating actions could occur if the company experiences significant and sustained deterioration in its operating performance, or if there is a significant decline in risk-adjusted capitalization.
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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