AM Best Affirms Credit Ratings of Macau Insurance Company Limited

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 Macau Insurance Company Limited (MIC) (Macau). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect MIC’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

MIC’s balance sheet strength continues to be supported by its risk-adjusted capitalisation, which remained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus continued to grow organically through full profit retention, supported by the company’s operating results, which have been consistently positive. In addition, the company’s capital and surplus was strengthened significantly by a capital gain from the disposal of its interest in Macau Life Insurance Company Limited in 2017, as well as a capital injection of MOP 100 million (USD 12.4 million) in 2018. However, the company’s investment portfolio remained skewed toward equities in 2019 and is expected to increase in accordance to the company’s Medium Term Strategy Refresh (MTSR). AM Best expects that capital market volatility may generate greater uncertainty for MIC’s capitalisation and earnings.

Positive underwriting and investment results remained supportive of MIC’s overall operating performance in 2019. The company continued to tighten its underwriting practice in 2019, which resulted in an improvement in the company’s claim experience, while its expense ratio benefited from the growing premium base. MIC’s investment results continued to support the company’s overall operating performance through a stable stream of interest and dividend income. According to the company’s MTSR, the company will continue to manage down its unprofitable business, and diversify its underwriting portfolio and distribution network through expansion in the small- and medium-sized enterprise and personal lines segments via its affiliate bank and direct channels.

MIC ranked third in Macau’s non-life insurance market in 2019, with a 10.8% share in terms of gross premiums written. On a net basis, the company’s underwriting portfolio is diversified moderately with employee compensation, health and motor insurance making up the majority of its business. Although the company continues to have higher-than-average exposure to investment risk, AM Best considers the company’s risk management capabilities to be appropriate. In particular, the company actively monitors its investment risk through various risk limits and modelling, as well as stress testing.

Positive rating actions could occur if MIC demonstrates successful implementation of its business plan to achieve sustained improvement in its operating performance while maintaining a robust level of risk-adjusted capitalisation. Negative rating actions could occur if MIC’s operating performance experiences a material deterioration due to unfavourable investment results or a significant decline in its risk-adjusted capitalisation.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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