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 Hong Leong Insurance (Asia) Limited (HLIA) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect HLIA’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
HLIA’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). A major offsetting factor was the company’s moderate reinsurance dependency. However, the potential credit risk is mitigated by HLIA’s prudent reinsurance programme with high quality reinsurers. The assessment also reflects the company’s low underwriting leverage and conservative investment allocation.
HLIA has long track record of operating profitability, supported by consistently positive underwriting results that outperformed industry peers, and evidenced by an average five-year combined ratio lower than 80%. Although for fiscal year ended 2020, net premium income experienced some contraction due to lower new business generated from travel insurance as a result of the COVID-19 pandemic, which led to a rise in combined ratio, overall underwriting results are still considered strong thanks to lower claim frequency and a high renewal rate from its personal line business, supplemented by a growth in commercial business due to a hardening of rates.
HLIA maintains a small market presence in Hong Kong’s general insurance market with a strong focus on personal line insurance, such as travel insurance and domestic helper insurance. A significant portion of the company’s new business is sourced from direct marketing and the utilisation of its online insurance portal, while more than one-third of premium revenue was generated from its commercial business through brokers. Nevertheless, the small market share and the niche business focus have constrained HLIA’s business profile assessment.
The stable outlooks reflect AM Best’s expectation that HLIA will maintain positive underwriting results that outperform the industry average, supported by a low acquisition cost structure, and favourable claims experience, as well as a gradual recovery of premium revenue from its core product lines.
Negative rating actions could occur if there is significant deterioration in HLIA’s risk-adjusted capitalisation or operating performance. Negative rating actions also could occur if there is material deterioration in the credit profile of HLIA’s parent companies, Hong Leong Financial Group Berhad and Hong Leong Company (Malaysia) Berhad.
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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