NOVEMBER 21, 2014 12:14 PM (EST)
A.M. Best Affirms Ratings of LIG Insurance Company Limited
FOR IMMEDIATE RELEASE
HONG KONG - NOVEMBER 21, 2014 12:14 PM (EST)
The rating affirmations reflect LIG's adequate risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR). Although the company's risk-adjusted capitalization declined between the fiscal year-end of March 2013 and December 2013, it remained adequate to support the current ratings. The company's risk-based capital (RBC) ratio has experienced downward pressure since fiscal year 2011, mainly driven by the multi-year period of strong premium growth and the tightening solvency regime. The company's RBC ratio was 183% as of June 2014, showing an improvement compared with 173% at year-end 2013; this is attributed to the increase in retained earnings and valuation gain in available-for-sale investments.
Offsetting factors include the execution risk that LIG faces in implementing its capital management plan and strengthening underwriting practices. Moreover, adverse results at the U.S. branch also negatively affected the company's overall underwriting profitability. In addition, the intensified competitive environment in the domestic market and dynamics in the interest rate and investment climates also create uncertainty for the company over the short to medium term. Going forward, A.M. Best will continue to closely monitor the company's risk-adjusted capitalization, capital management and business plan execution.
While positive rating actions are unlikely over the short to medium term, negative rating movement could occur if there is material deterioration in the company's risk-adjusted capitalization due to significant shortfall in its capital management plan and material deterioration in its 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.
Key insurance criteria reports utilized:
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.