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 China BOCOM Insurance Company Limited (CBIC) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CBIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the wide range of support that the company receives from its ultimate parent, Bank of Communications Co., Ltd. (BOCOM), including capital support, brand recognition, distribution channel, investment management, operational and risk management.
CBIC’s very strong balance sheet assessment is underpinned by risk-adjusted capitalisation that remained at the strongest level at year-end 2023, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus has achieved steady growth in 2023, supported by full profit retention. The company also maintains a healthy regulatory solvency position as evaluated by Hong Kong’s Risk-Based Capital ratio in 2023. Notwithstanding, investment risk remains an offsetting factor in the balance sheet strength assessment given the company’s high-risk appetite for unlisted investments and concentration in a private equity fund investment. CBIC’s moderately high reinsurance dependency is another offsetting factor, which is partly mitigated by its prudent reinsurance arrangements and diversified reinsurance panel.
AM Best views CBIC’s operating performance as adequate. In 2023, the company achieved moderate growth in insurance services revenue, while improving bottom-line results. Investment income remains the key contributor to the company’s net profit, while its underwriting performance continues to be impacted by high operating expenses relative to its small premium base.
AM Best assesses CBIC’s business profile as limited. The company maintains a modest presence in Hong Kong’s highly fragmented general insurance market. The company’s underwriting portfolio remains diversified. It also has a diversified distribution network including bancassurance, brokers, agencies and inward facultative. As the sole general insurance arm of the BOCOM group, CBIC receives distribution support from BOCOM’s extensive banking network and subsidiaries.
Although CBIC’s current ratings are well-placed, negative rating actions could occur if there is a material deterioration in CBIC's operating performance, for example, due to a deterioration of combined ratio or large losses from its unlisted financial assets. Negative rating actions could also occur if there is a substantial decline in CBIC’s overall balance sheet strength, for example, due to heightened exposure to higher risk investments. Positive rating actions are probable if the company achieves sustained improvement in its operating performance that is superior to market peers.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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