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FOR IMMEDIATE RELEASE
HONG KONG - JULY 30, 2015 02:34 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 good risk-adjusted capitalization and solid competitive position in Hong Kong's life insurance market. The ratings also recognize the continued capital and operational support provided by its banking parent BOC Hong Kong (Holdings) Limited (BOCHK).
BOCGL has improved its risk-adjusted capitalization, as measured by the Best's Capital Adequacy Ratio (BCAR), and its local solvency ratio in 2014 due mainly to an increase in capital and surplus, which is attributable to its favorable investment results. BOCGL generates business mainly via an extensive banking network of the Bank of China (Hong Kong) Limited, one of the three note-issuing banks in Hong Kong authorized by the Hong Kong Monetary Authority. The affiliated bank's distribution channel and substantial customer base is expected to continue providing BOCGL a competitive advantage as a provider of Renminbi (RMB)-denominated life insurance in Hong Kong along with opportunities for business growth. BOCGL maintains a stable relationship with its existing and new reinsurance partners. This includes highly rated international reinsurers, as well as Chinese state-owned reinsurers that are expected to provide ongoing capacity to BOCGL in underwriting RMB-denominated saving products.
Offsetting these positive rating factors is the potential volatility in BOCGL's regulatory solvency arising from markets risks; for example, a widening of credit spread in its corporate bonds investments. While the co-insurance arrangement in relation to RMB saving business supported BOCGL's business growth in past years, this has also resulted in an increase in counterparty risk exposure. A.M. Best's concerns have been alleviated as standby letters of credit have been issued by major Chinese state-owned banks and the steps the company has taken to diversify its reinsurance panel.
Positive rating action could result if BOCGL shows sustained improvement in profitability in its new business and continued diversity in its mix of product types and distribution channels while maintaining strong and stable risk-adjusted capitalization. Downward rating pressure could arise if the company's risk-adjusted capitalization deteriorates materially; for example, in the event of adverse financial market movements or heightened counterparty risk, or if there is a material deterioration in BOCHK's credit ratings or its operational and financial support provided to BOCGL weakens.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to rating(s) 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 visit A.M. Best's Ratings & Criteria Center.
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