Best’s News & Research Service - August 27, 2021 11:34 AM (EDT)
AM Best Affirms Credit Ratings of Macau Insurance Company Limited
- August 27, 2021 11:34 AM (EDT)
Hong Kong //BestWire// - AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Macau Insurance Company Limited (MIC) (Macau). The outlook of the Credit Ratings (ratings) is stable.
The ratings reflect MIC’s balance sheet strength, which AM Best assesses 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 capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company also has grown its capital and surplus organically through full profit retention as well as investment capital gains. Notwithstanding, investment risk is a major offsetting factor in the balance sheet strength as the company’s investment portfolio mainly consists of equity investments, which accounted for over 60% of the investment holdings in 2020. Nevertheless, the company adopts an active hedging strategy to manage and control volatility in its investment portfolio. The company’s reinsurance dependency is moderately high with the majority of reinsurers of good credit quality.
MIC’s operating results were positive in 2020, supported by positive underwriting and investment results. The company continued to expand its business in 2020, with moderate growth in property business. Other major lines of business remained relatively stable. The company’s net combined ratio also improved in 2020, driven by a better net loss ratio in medical and motor insurance business, albeit partially offset by an increase in the company’s net expense ratio. Stable and positive investment income generated from the company’s investment portfolio continue to support MIC’s overall operating results. However, given that a majority of the investment portfolio is made up of equity investments, the company’s capital and earnings through other comprehensive income could experience periods of volatility during investment market swings. Nevertheless, MIC’s active hedging strategy would continue to manage the volatility in its investment portfolio.
MIC continues to rank No. 3 in the Macau non-life insurance market, with a market share of 12.0% in terms of gross premium written. The company’s underwriting portfolio remains moderately diversified with major lines of business in property, medical, employee compensation and motor business. The company mainly relies on non-affiliated agents and brokers to source business with limited control over the distribution channels. Nevertheless, according the company’s business plan, the company would continue to diversify its underwriting portfolio and distribution channel, as well as provide training and operating priorities with its non-affiliated agents and brokers to maintain the quality of business and strengthen the commitment of the agencies toward MIC’s business.
Positive rating actions could occur if MIC demonstrates successful implementation of its business plan to achieve sustained improvement and stability in its operating performance while maintaining a robust level of risk-adjusted capitalisation. Negative rating actions could occur if MIC’s operating performance experiences a material deterioration due to unfavourable investment results or a significantly weaker underwriting performance.
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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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.