Best’s News & Research Service - August 30, 2018 01:44 PM (EDT)
A.M. Best Affirms Credit Ratings of Macau Insurance Company Limited
- August 30, 2018 01:44 PM (EDT)
Hong Kong //BestWire// - A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Macau Insurance Company Limited (MIC) (Macau). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect MIC’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
MIC’s balance sheet strength is supported by its risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, following the sale of a life insurance subsidiary and a capital infusion from Dah Sing Financial Holdings Limited, the company’s capital base has strengthened significantly, resulting in a level of underwriting capacity that is generally higher than its peers.
Despite a reduced revenue base in 2016 and 2017, which resulted in some pressure on the expense ratio, the company’s pre-tax operating return on equity has remained stable and positive. MIC’s loss ratios were generally higher than its peers, but underwriting profits have been consistent, and its interim results for 2018 also have shown a significant improvement after the company implemented various measures to remediate the performance of its in-force business. Over the short to medium term, A.M. Best believes that as MIC continues to manage down its exposure to unprofitable business, while pursuing profitable growth through its bancassurance and direct channels, the company’s underwriting and operating results will remain positive and gradually improve over time.
MIC is a major insurer in Macau that underwrites non-life personal and commercial insurance products. Given its status as a local insurer within a small market, MIC’s risk profile shows high business concentration risk. Nevertheless, A.M. Best considers the company’s risk management capabilities to be aligned appropriately with its risk profile. This is supported by the company’s conservative underwriting and investment approach, as well as by various strategic initiatives to increase business volumes and broaden its policyholder base.
The stable outlooks reflect A.M. Best’s expectation that MIC will maintain positive underwriting and operating results, supported by steady revenue growth, stable claims ratios and an expense ratio that will decline gradually over time.
Positive rating actions could occur if MIC demonstrates consistent and sustained improvement in its business profile and underwriting performance, coupled with a strong level of risk-adjusted capitalization. Negative rating actions could occur if MIC’s operating performance deteriorates, leading to a decline in its risk-adjusted capitalization level.
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 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 see A.M. 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 A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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