HONG KONG, July 22, 2022–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of China Merchants Insurance Company Limited (CMI) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CMI’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the parental support from China Merchants Group Limited (CMG), including capital support, brand recognition, investment management and risk oversight.
CMI’s very strong balance sheet strength assessment is underpinned by its strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus continued to grow organically in 2021 through full retention of operating profits. The company maintained a conservative investment strategy, with a majority of its assets allocated to cash, bank deposits and short-duration bonds. Premium cession increased as the proportion of commercial business enlarged. The reinsurance program remains comprehensive with reinsurers of good credit quality.
CMI’s operating performance was positive in 2021, with a profit after tax of HKD 29 million (USD 3.7 million), supported by positive underwriting and investment results. The company has been profitable over the past five years with an average return on equity of 4.2% (2017-2021). Underwriting results showed a favorable improvement in 2021, with a net combined ratio of 84.9%, mainly supported by better claims experience during the year. Increased reinsurance commission income also helped to offset the upward pressure in the management expense ratio. A growing stream of interest income over the past five years also contributed to the company’s positive and stable investment results, although yields remain low.
CMI maintained a stable-yet-small market presence