AM Best Affirms Credit Ratings of Sun Hung Kai Properties Insurance 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 Sun Hung Kai Properties Insurance Limited (SHKPI) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect SHKPI’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

SHKPI’s very strong balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which was at the strongest level in fiscal year-end 30 June 2024 (FY2024), as measured by Best’s Capital Adequacy Ratio (BCAR). The company has been increasing its investment in cash and cash equivalents in recent years. Its bond portfolio also demonstrates an improvement in the credit quality of the company following efforts to de-risk the majority of its bond exposure to China’s real estate sector. In light of SHKPI’s prudent investment strategy, AM Best considers its capital level a sufficient buffer to absorb investment risks. Other supporting factors include the company’s strong liquidity position, healthy solvency ratio and appropriate reinsurance programme.

SHKPI has consistently maintained a strong operating performance over the last few years, mainly attributable to its superior underwriting profitability compared to industry peers. In FY2024, its double-digit return-on-equity ratio was a combined result of favourable underwriting experience and enhanced investment performance. Amid a higher interest rate environment, the company’s investment returns further improved in FY2024. The company also continues to benefit from the group business with better quality and minimal acquisition expenses, leading to its favorable underwriting results.

SHKPI is a wholly owned subsidiary of Sun Hung Kai Properties Limited (SHKP), one of the largest property development and investment conglomerates in Hong Kong. With a focus on commercial business and employees’ compensation insurance, SHKPI benefits from its parental network to write a major part of its business from associated and subsidiary companies, and it continues to operate in a low acquisition cost business model. Despite holding a modest share of Hong Kong’s general insurance segment, SHKPI manages to maintain its market position in a profitable manner largely attributable to its group-related businesses.

Negative rating actions could occur if there is a significant deterioration in SHKPI’s operating performance. Negative rating actions also could arise if there is a material deterioration in SHKPI's risk-adjusted capitalisation, for example, due to material investment losses. Although it is unlikely in the near term, positive rating actions could arise if there is significant improvement in SHKPI's balance sheet strength, for example, due to further improvements in its asset quality and capital size.

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

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