AM Best Affirms Credit Ratings of China BOCOM 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-” (Excellent) of China BOCOM Insurance Company Limited (CBIC) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect CBIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the wide range of support that the company receives as a wholly owned subsidiary of the Bank of Communications Co., Ltd. (BOCOM), a large state-owned banking group in China.

CBIC’s risk-adjusted capitalisation remained at the strongest level in 2020, as measured by Best’s Capital Adequacy Ratio (BCAR). Positive investment results remained the key driver of overall earnings in 2020, although its performance was dragged partially by some bond impairment losses. The company plans to diversify its investment portfolio into equity funds. CBIC’s loss ratio remains lower than the market average, despite a rise in 2020 due to less favourable claims experience in some inward reinsurance business. The company expected that the situation will improve following the elimination of some Employees' Compensation inward reinsurance business in 2020.

CBIC maintains a small underwriting portfolio in Hong Kong’s non-life market, and receives support from BOCOM in terms of distribution, brand recognition, investment, risk management, operations and capital.

Offsetting rating factors include the continued above-average exposure and concentration risk in higher-risk assets including private equity, which generally entail less transparency and higher liquidity and credit risks. The company also has a relatively high reinsurance dependence.

While positive rating actions are unlikely to occur over the near term, negative rating actions could occur if there is a substantial decline in CBIC’s risk-adjusted capitalisation; a material deterioration in its operating performance; notably weaker support from BOCOM; or if the parent bank’s credit fundamentals deteriorate materially.

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 use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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