HONG KONG--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to BEA Life Limited (BEA Life) (Hong Kong). The outlook assigned to these Credit Ratings (ratings) is stable.
BEA Life is a wholly owned subsidiary of The Bank of East Asia, Limited (BEA), a Hong Kong financial services group that offers a comprehensive range of corporate banking, personal banking, wealth management and investment services to its customers, mainly in Hong Kong and Mainland China. Incorporated in 2006, BEA Life has provided a range of life insurance solutions for individual and corporate customers in Hong Kong since 2008.
The ratings reflect BEA Life’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the implicit and explicit support from BEA including capital, brand recognition, business development, product distribution, risk management and operational support.
BEA Life’s balance sheet strength is supported by its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus has benefited from full profit retention over the past five years. AM Best considers investment risk to be a key offsetting rating factor, mainly attributed to the high investment leverage. Volatility in the capital market may induce higher uncertainty to its capital and earnings. Other supportive factors to the balance sheet include prudent reserving practices and a well-diversified investment portfolio with strong liquidity.
BEA Life’s operating performance has remained consistently positive with a five-year average return on equity of 15.5% and a 1.3% return on assets. The company maintains prudent controls over its expenses. Net expense to premium written remains relatively low and stable. The positive operating performance is supported further by the participating feature of the policies sold, which offers some buffer to partially mitigate the impact from underwriting and investment volatility.
BEA Life is a medium-sized company in Hong Kong’s life insurance market, which exhibits a high level of market concentration. BEA Life utilizes the parent group’s long-established bank network and digital platforms to distribute its products, which are mainly short-term saving-type policies. Notwithstanding, AM Best believes the company’s bancassurance model may post challenges in terms of product diversification.
The stable outlooks reflect AM Best’s expectations that the company’s rating fundamentals will remain unchanged over the intermediate term.
BEA Life is well-positioned at its current rating level. Negative rating actions could occur if the company experiences a material deterioration in its risk-adjusted capitalization or exhibits a material and consistently worsening trend in operating profitability, for example, due to adverse investment results.
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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