HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Sun Hung Kai Properties Insurance Limited (SHKPI) (Hong Kong). The outlook for the ratings remains stable.
The rating affirmations reflect SHKPI’s favorable operating performance and strong risk-adjusted capitalization. The company also benefits from the business and investment support as a wholly-owned subsidiary of Sun Hung Kai Properties Limited (SHKP), one of the leading property conglomerates based in Hong Kong.
SHKPI generated over half of its underwriting business from SHKP-related construction projects, of which most are comprised of employees’ compensation (EC) business with minimal acquisition costs. The company’s investment portfolio is managed under the investment arm of SHKP. Favorable investment performance was demonstrated through its track record in selecting investments that offered satisfactory returns relative to its risk profile.
These positive factors are partially offset by the decrease in SHKPI’s underwriting margin, potential negative revaluation on investment properties and relatively high concentration on below-investment grade bonds within its fixed income portfolio. Although SHKPI consistently achieved profitable underwriting results, the increase in the frequency of smaller claims had elevated the company’s retained losses and net loss ratio over the past two years. Acquisition costs had also increased since the company became more active in expanding into third party business since 2011.
SHKPI is well positioned at its current rating level. Negative rating pressure may occur if the company demonstrates significant and continued deterioration in underwriting results and/or investment losses that lead to a substantial decline in its risk-adjusted capitalization.
The methodology used in determining these 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.
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. For more information, visit www.ambest.com.
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