AM Best Affirms Credit Ratings of Hong Leong Insurance (Asia) Limited

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January 6, 2023 9:49 AM EST

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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 Hong Leong Insurance (Asia) Limited (HLIA). The outlook of these Credit Ratings (ratings) is stable.

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

HLIA’s overall profitability is mainly supported by its underwriting profits. Although the company’s combined ratio remains significantly better than the industry average, it exhibits an increasing trend as the proportion of its lower profit margin business has increased over time. The company’s unrealised losses from equity investments due to capital market volatility also led to a reduction in overall net profit in recent years. The stable outlooks reflect AM Best’s expectation that HLIA’s underwriting performance will recover to the pre-COVID level over the short to intermediate term, and overall profitability will not be materially undermined by equity market volatility.

HLIA’s risk-adjusted capitalisation remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company maintains a low underwriting leverage and an appropriate reinsurance programme backed by reinsurers of good credit quality. However, the company’s modest capital size, concentration risk in real estate holdings and moderate reinsurance dependency are partially offsetting factors.

HLIA is a small player in the Hong Kong general insurance market. While accident and health insurance continues to make up the largest portion of total net premiums, the company is expanding its commercial lines business, for instance, by tapping opportunities in the small- to medium-sized enterprise segment through local brokers and agents.

Negative rating actions could occur if the negative trend in the operating performance of HLIA continued whereupon such performance became no better than market average, for example, due to consistently material lower investment yields and/or a diminished underwriting margin. Negative rating actions also could occur if there is significant deterioration in the company’s risk-adjusted capitalisation. A deterioration in the credit profile of HLIA’s parent companies, Hong Leong Financial Group Berhad and Hong Leong Company (Malaysia) Berhad also may pose a negative impact on HLIA’s ratings.

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.

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.