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 CMB Wing Lung Insurance Company Limited (CMBWLI) (Hong Kong). The outlook of these Credit Ratings (ratings) is positive.
The ratings reflect CMBWLI’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and marginal enterprise risk management.
CMBWLI’s very strong balance sheet strength assessment is underpinned by its robust risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital base continued to grow organically in 2021, supported by its positive operating results and full profit retention. CMBWLI diversified its investment portfolio in 2021 and increased its equity investments, including mutual funds and equity instruments. The mutual funds are mostly fixed-income funds. The insurer also continues to enhance the credit quality of its bond investments, which remain as its largest investment asset type other than cash.
CMBWLI’s overall operating performance remained favourable in 2021, supported by its outstanding underwriting performance. The company also has reported decent growth in its premium volume over the past few years. CMBWLI’s investment performance continues to be supported by a stream of interest, dividend and rental income. However, this was partially offset by some realised capital losses since the second half of 2021.
CMBWLI is a medium-size, non-life insurer in Hong Kong, and one of the major market players in its domestic market’s employees’ compensation segment. The company continues to demonstrate its capability to acquire insurance business with better-than-average loss experience. The company maintained a relatively stable mix of business over the past few years; general liability and motor continued to be its largest lines of business. CMBWLI’s business mix poses moderate concentration risk in terms of product offerings and geography.
CMBWLI continued to strengthen various aspects of its risk management over the past few years. The positive outlooks reflect an expectation of improvement in investment risk controls, risk identification and monitoring tools, risk governance and risk quantification capability. AM Best expects the company to continue enhancing its risk management framework as it expands its risk exposure in both investment and underwriting.
Positive rating actions could occur if CMBWLI continues to demonstrate improvement in enterprise-wide risk management while maintaining robust risk-adjusted capitalisation and a favourable operating performance. Negative rating actions could occur if the company’s operating performance deteriorates materially due to adverse underwriting results or investment losses, or if the company’s business profile significantly weakens.
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