2013-10-10 18:03:02 -
A.M. Best Asia-Pacific Limited has affirmed the financial strength ratings of A- (Excellent) and issuer credit ratings of “a-” of Macau Insurance Company Limited (MIC) and Macau Life Insurance Company Limited (MLIC) (both domiciled in Macau). The outlook for all ratings is stable.
The affirmation of the ratings for MIC reflects its sound risk-adjusted capitalization on a consolidated basis. As measured by Best’s Capital Adequacy Ratio (BCAR), the company’s capital adequacy remains supportive of its current ratings. MIC also maintains a conservative level of net premium leverage, which is generally more conservative than its peers.
These positive rating factors are partially offset by the quality of MIC’s earnings. Despite the continuous improvements in its net profits since 2008, these increases were driven
predominantly by gains outside of its underwriting operations. In addition, although the overall loss ratio showed signs of stabilizing in recent years, claims experience was quite volatile in some retained lines of business.
While the outlook is stable, factors that could result in an upgrade of MIC’s ratings are a sustainable improvement in its underwriting performance coupled with maintenance of strong risk-adjusted capitalization. However, any deterioration in MIC’s underwriting performance and/or risk-adjusted capitalization, may lead to a downgrade of its ratings.
The affirmation of MLIC’s ratings reflects the sound level of its BCAR and local solvency ratio. A.M. Best believes MLIC’s risk-based capital is likely to remain solid to support its prospective business growth over the near term.
The business collaboration and support from both companies’ ultimate parent, Dah Sing Financial Holdings Limited (DSFH), one of the financial conglomerates in Hong Kong, is also a positive rating factor.
MLIC’s products are distributed through the network of an affiliated bank in Macau. MLIC enjoys economies of scale through sharing of operating costs and reduction in duplication of resources in product development with other DSFH subsidiaries.
Partially offsetting these positive rating factors is MLIC’s marginal profile in the Macau life insurance market. The company is still in the process of rebuilding its product package. It will take some time to complete a comprehensive product package and build a sizable stream of premium income. While A.M. Best does not expect any positive rating actions, downward rating pressures could arise if there is a significant deterioration in MLIC’s risk-adjusted capitalization in the event of adverse financial market movements.
The methodology used in determining these interactive 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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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