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 Bank of China Group Insurance Company Limited (BOCG Insurance) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect BOCG Insurance’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The risk-adjusted capitalisation level of BOCG Insurance remained at the strongest level as of year-end 2021, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus continued to grow organically in 2021, supported by profit retention and favourable capital gains. Approximately half of BOCG Insurance’s investment portfolio is composed of interests in associated companies, whereas the remainder consists of investment grade bonds and cash and cash equivalents. Despite material exposure to illiquid investments, the company maintains an adequate level of liquidity to support its business operation.
Over the 2017-2021 period, BOCG Insurance remained profitable with solid return-on-equity. The company’s net profit in 2021 was underpinned by solid investment returns, supported by its share of profits from investments in associated insurance companies, coupled with a stable stream of interest and dividend income from its fixed income-oriented investment portfolio. The company improved its loss ratio in 2021 due to continued efforts to enhance its underwriting profitability, which led to an underwriting profit and a combined ratio under 100%. This was attributable to the lower net incurred loss ratio for property damage, motor, and accident and health lines.
In 2021, BOCG Insurance ranked 11th in terms of Hong Kong onshore non-life gross written premium, with a market share of 2.7%. The company’s underwriting portfolio remains diversified with four major product lines: property damage; accident and health; motor; and general liability. Going forward, the company is expected to focus on direct business, while maintaining the premium scale of its inward reinsurance portfolio. AM Best expects the company to continue leveraging the broad branch network of its banking parent to tap the vast customer base and obtain profitable business.
Negative rating actions could occur if the company experiences a material deterioration in its risk-adjusted capitalisation. Negative rating actions could also occur if there is material deterioration in its operating profitability, for instance, due to investment returns that are more than offset by sustained and unfavourable underwriting loss experience.
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