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FOR IMMEDIATE RELEASE
HONG KONG - JULY 31, 2014 01:24 PM (EDT)
A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of "a" of BOC Group Life Assurance Company Limited (BOCGL) (Hong Kong). The outlook for both ratings is stable.
The ratings of BOCGL reflect its supportive risk-adjusted capitalization and local solvency, strong business profile in the Hong Kong life insurance market, in particular Renminbi (RMB)-denominated life products, as well as the continued support from its banking parent, BOC Hong Kong (Holdings) Limited (BOCHK) in terms of distribution and capital support.
BOCGL's capital and surplus strengthened in 2013, mainly driven by consistently favorable investment earnings and full profit retention. The company is considered a pioneer in the RMB life insurance market in Hong Kong, with an established leading market position. In addition, BOCGL benefits from low acquisition costs while maintaining its market share as a result of the extensive bancassurance network of BOCHK and adequate reinsurance support.
Offsetting these positive rating factors is continued investment risk exposure, in particular the yield-spread widening of corporate debt investments that may create volatility in the company's net profits and capital and surplus. Moreover, growing reinsurance recoverables in tandem with the forecast strong growth in RMB products may create pressure to BOCGL's risk-adjusted capitalization should the counterparty risk of the major reinsurer deteriorate. BOCGL has appropriate measures in place to mitigate such counterparty risk.
Positive rating actions may occur if BOCGL can achieve sustainable improvement in its risk-adjusted capitalization and local solvency while continuing to maintain its strong business profile during its planned gradual shift of product mix. Downward rating pressure could arise if there is a significant deterioration in the company's risk-adjusted capitalization in the event of adverse financial market movement and heightened counterparty risk.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.