OCTOBER 06, 2022 09:56 AM (EDT)
AM Best Comments on Credit Ratings of China Merchants Ins After Announced Business Transfer Agreement With CMB Wing Lung Ins
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FOR IMMEDIATE RELEASE
HONG KONG - OCTOBER 06, 2022 09:56 AM (EDT)
AM Best has commented that the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of China Merchants Insurance Company Limited (CMI) (Hong Kong) remain unchanged following the disclosure by China Merchants Bank Company Limited (CMB) of the business transfer agreement between CMI and CMB Wing Lung Insurance Company Limited (CMBWLI) on 28 September 2022.
Per the disclosure, CMI entered into a business transfer agreement with CMBWLI, under which CMI will transfer its general insurance business (including assets and liabilities related to the business) to CMBWLI, which will in turn issue 9,856,066 of its shares to CMI. As a result, CMI will directly own 25.37% of the enlarged share capital of CMBWLI, and CMB will indirectly hold 74.63% of the shares in CMBWLI. The business acquisition and new issue of shares are subject to approval by the Insurance Authority (IA) of Hong Kong, and will take place within 60 days after its approval. Subsequently, CMI will distribute all of its shares in CMBWLI to China Merchants Insurance Holdings (CMIH).
In addition, CMIH entered into a share subscription agreement with CMBWLI on 28 September 2022 to subscribe for 25,590,806 new shares of CMBWLI for HKD 1,171 million in cash. Upon the completion of the above transactions, CMIH will become the majority shareholder of CMBWLI by directly holding 55% of its further enlarged share capital, while CMB will indirectly own the remaining 45% of the shares. The ultimate parent of CMBWLI will change to China Merchants Group Limited (CMG) from CMB. The capital injection will take place within 60 days upon the IA’s regulatory approval for the aforementioned change in shareholders.
AM Best currently assesses CMI’s balance sheet strength as very strong, combined with adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the parental support from CMG, including capital support, brand recognition, investment management and risk oversight. AM Best views CMI’s credit fundamentals remain unchanged as the company continues to operate on a going concern basis.
Per the disclosure, upon completion of the aforementioned business acquisition and distribution to CMIH, CMI will apply to the IA for withdrawal of authorization to carry on general insurance business. Upon approval from the regulator, AM Best will administratively remove the Best’s Credit Ratings on CMI.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.