HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Luen Fung Hang Insurance Company Limited (LFH) (Macau). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect LFH’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
LFH’s balance sheet strength continues to be supported by a robust level of risk-adjusted capitalization, underpinned by a solid organic growth in capital and surplus through profit retention, low underwriting leverage and conservative investment strategy. Other supportive factors include a prudent reinsurance arrangement and strong liquidity.
LFH has demonstrated a track record of consistently strong and better-than-average operating performance over the past five years. AM Best believes this trend will persist over the short to intermediate term, driven by an underwriting portfolio that exhibits a favorable loss ratio with low volatility, as well as stable income from its prudent investment portfolio, which contributes to offset the upward pressure in its acquisition costs.
Leveraging the continued support from its bank shareholders, LFH maintains a market-leading position in Macau and a competitive edge in acquiring good quality insurance business through bancassurance distribution, as reflected in its favorable underwriting performance. Notwithstanding, its narrow geographic focus is a major offsetting factor that has constrained its business profile assessment.
LFH is well-positioned for its current ratings. Negative rating actions could occur if the company’s operating performance exhibits a material and deteriorating trend in profitability such that it no longer supports a strong assessment, or if there is a significant weakening in the company’s business profile, for example, a sharp decline in market share due to weaker distribution support from its bank shareholders. Negative rating actions also could occur if LFH’s risk-adjusted capitalization experiences a significant deterioration.
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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