2013-02-07 18:02:19 -
A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Hong Leong Insurance (Asia) Limited (HLIA) (Hong Kong). The outlook for both ratings is stable.
The rating affirmations reflect HLIA’s sound risk-adjusted capitalization and consistently favorable underwriting performance, which is attributable to its short-tail liabilities and personal lines business with relatively low risk exposure.
HLIA’s risk-adjusted capitalization is well supported by its organic surplus growth and a conservative underwriting leverage. Management’s initiatives in strengthening the company’s distribution capability on personal lines products contributed favorably to its underwriting profitability, with personal lines products consistently accounting for 60% or above of the company’s book of business over the past five years.
Partially offsetting
these positive rating factors are HLIA’s exposure to financial market risks and its relatively high expense ratio.
HLIA’s investment portfolio is managed by its affiliated asset management companies within Hong Leong Company (Malaysia) Berhad (or Hong Leong Group, the ultimate parent of HLIA). However, HLIA achieved a modest compound annual investment yield of 0.5% over the past five years despite its assets being managed under a dynamic approach. It is expected that HLIA will continue to be exposed to potential earnings volatility in view of its current investment risk appetite over the medium term.
Future positive rating actions could occur if HLIA can demonstrate a proven risk management strategy to mitigate its investment volatility and improve its expense controls. Negative rating actions could occur if the company’s risk-adjusted capitalization materially deteriorates due to sizeable investment losses.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include.
“Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; and “Risk Management and the Rating Process for Insurance Companies.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology :
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Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com :
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A.M. Best Asia-Pacific LimitedVivian CheungFinancial
Analyst+852-2827-3411
vivian.cheung@ambest.com : mailto:vivian.cheung@ambest.com orMichael
WongSenior Financial Analyst+852-2827-3418
michael.wong@ambest.com : mailto:michael.wong@ambest.com orRachelle
MorrowSenior Manager, Public Relations+(1) 908
439 2200, ext. 5378
rachelle.morrow@ambest.com : mailto:rachelle.morrow@ambest.com orJim
PeavyAssistant Vice President, Public Relations+(1)
908 439 2200, ext. 5644
james.peavy@ambest.com : mailto:james.peavy@ambest.com
