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FOR IMMEDIATE RELEASE
HONG KONG - SEPTEMBER 26, 2014 11:52 AM (EDT)
A.M. Best has affirmed the financial strength ratings of A- (Excellent) and issuer credit ratings of "a-" of Macau Insurance Company Limited (MIC) and Macau Life Insurance Company Limited (MLIC) (both domiciled in Macau). The outlook for all ratings is stable.
MIC's ratings reflect its sound risk-adjusted capitalization on a consolidated basis. As measured by Best's Capital Adequacy Ratio (BCAR), the capital adequacy remains supportive of its current ratings. MIC continues to maintain a conservative level of net premium leverage, which is generally lower than its peers.
The ratings also reflect MIC's sound liquidity and prudent investment strategy.
These positive rating factors are partially offset by MIC's relatively lower underwriting profit margin than its peer competitors in Macau's non-life insurance segment. Although MIC has a diversified underwriting portfolio comprised of property and casualty lines, profitability of some casualty lines continues to be marginal. Going forward, MIC is committed to continuously strengthen its underwriting control in order to further improve its underwriting results.
Positive rating actions could occur if MIC demonstrates substantial and sustainable improvement in its underwriting performance coupled with maintenance of strong risk-adjusted capitalization. Negative rating actions could occur if MIC's operating performance deteriorates, leading to a decline in the company's capitalization level.
MLIC's ratings reflect the company's adequate capitalization. The ratings also acknowledge the support MLIC receives from MIC and other subsidiaries of MLIC and MIC's ultimate parent, Dah Sing Financial Holdings Limited (DSFH), in terms of product distribution, business development and operations.
MLIC's products are distributed through the network of an affiliated bank in Macau. MLIC achieves economies of scale and reduced overhead on product development by sharing operating costs with other DSFH subsidiaries.
MLIC's pension business, meanwhile, has generated a steady fund management fee for the company, which has contributed to the stability of its earnings.
Partially offsetting these positive rating factors is MLIC's marginal profile in Macau's life insurance market. MLIC's market share in this segment was below 2% in 2013. Although MLIC's premium income has showed some steady growth since 2010, the overall life insurance market in Macau has grown at a much faster pace during the same period.
While A.M. Best does not expect any positive rating actions on MLIC in the near term, downward rating pressures could arise if there is a significant deterioration in MLIC's risk-adjusted capitalization due to unsatisfactory operating results.
The methodology used in determining these interactive 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.