Best’s News & Research Service - August 16, 2018 10:35 AM (EDT)
A.M. Best Affirms Credit Ratings of China BOCOM Insurance Company Limited
- August 16, 2018 10:35 AM (EDT)
Hong Kong //BestWire// - A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” 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 A.M. Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
CBIC’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains at the strongest level and is attributed in part to the company’s low underwriting leverage. Capital and surplus grew steadily and organically in the past five years, underpinned by strong investment results and full retention of operating profits. As a wholly owned subsidiary and the sole Hong Kong general insurance arm of Bank of Communications Co., Ltd. (BOCOM), a large state-owned banking group in China, CBIC receives extensive business development and distribution support from the group’s banking network in Hong Kong, mainland China, and overseas. It also receives a wide range of support from its parent in terms of brand recognition, investment, risk management, operations and capital support.
An offsetting rating factor is CBIC’s high operating expense ratio, historically and prospectively, in light of growing management expense pressure versus a small and flat net premium base. The company is exposed to credit risk and liquidity risk, as well as country concentration risk in its investment portfolio, which consists primarily of fixed income investment in China state-owned enterprises and contains a material portion of non-rated bonds. In addition, the competitive conditions in Hong Kong’s general insurance market remain a continuing challenge to CBIC’s underwriting profitability and business development.
Positive rating actions could occur if CBIC demonstrates significant improvement in its market position while maintaining a stable and profitable operating performance. Negative rating actions could occur if there is material deterioration in its operating performance or if the support from BOCOM weakens notably.
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 A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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