International ratings firm AM Best has affirmed its ratings of Hong Kong insurer Wing Lung Insurance Company
Limited, awarding it the financial strength rating of A- (excellent) and the issuer credit rating of “a-”. The outlook for each rating is stable.
The affirmations are linked to WLI’s strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), good operating results and sufficient reinsurance protection.
By the end of 2015, WLI’s capital and surplus improved to US$122m, a year-on-year increase of 13.5% and five-year compound average growth of 16.5% per annum. The capital improvement is attributed to full profit retention over the past several years. In spite of heightened competition in Hong Kong’s employees’ compensation and motor lines segments, the firm has kept pricing disciplined and brought forth improving underwriting results since 2010. WLI also has a stable investment income from a diverse portfolio.
The risk factors facing WLI are exposure to credit risks from relatively risky non-rated bonds and the highly competitive environment in Hong Kong’s non-life insurance market.
Ratings can be improved if WLI shows substantial improvement to its business profile, while keeping consistent its strong risk-adjusted capitalization and stable underwriting/investment performance. Negative ratings could happen if the firm’s risk-adjusted capitalization significantly declines, for example, due to unfavorable operating performance.
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