Press Release - AUGUST 08, 2019
AM Best Affirms Credit Ratings of Blue Cross (Asia-Pacific) Insurance Limited
FOR IMMEDIATE RELEASE
HONG KONG - AUGUST 08, 2019
The ratings reflect Blue Cross’ balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
AM Best expects Blue Cross’ risk-adjusted capitalization to remain at a robust level over the short to intermediate term, supported by a diversified investment portfolio with strong liquidity, the gradual release of risk capital in tandem with the run-off of its life business and organic capital growth with those earnings offset by a high dividend payout ratio.
The company continues to adopt a risk-selective underwriting approach to strengthen its core medical insurance portfolio and other non-life products. Underwriting results have been consistently profitable over the past five years, partially attributed to an expense ratio that is lower than its peers. Net investment results declined in 2018 due to heightened volatility in the capital market during the year. Notwithstanding, the high proportion of fixed income investments continued to provide the company a stream of stable interest income.
Blue Cross is a well-established mid-sized general insurance company focusing on health insurance in Hong Kong. The company has maintained the fourth-largest market share of 7% in terms of gross premium written in the accident and health line, which mainly consists of group and individual medical insurance. The company consistently utilizes a diversified distribution network while also continually augmenting its electronic platforms to enhance operational efficiency and promote cross-selling opportunities for its insurance products.
Offsetting rating factors include the challenging operating environment, in particular for group medical insurance, due to market competition and medical inflation. In addition, Blue Cross’ capital and surplus is subject to some volatility arising from changes in fair values of investment assets.
The stable outlooks reflect the expectations that the company’s rating fundamentals will remain unchanged over the intermediate term.
Blue Cross is well-positioned at its current rating level. Negative rating actions could occur if there is a material deterioration in the company’s risk-adjusted capitalization or if the company exhibits a material deteriorating trend in its operating profitability.
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 AM 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 AM 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 AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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