HONG KONG: AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Sun Hung Kai Properties Insurance Limited (SHKPI) Hong Kong. The outlook of these Credit Ratings (ratings) is stable.
SHKPI is a wholly owned subsidiary of Sun Hung Kai Properties Limited (SHKP), one of the largest and most well-established property development and investment conglomerates in Hong Kong.
The ratings reflect SHKPI’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
SHKPI’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is categorized as being at the strongest level, underpinned by its low net retention and moderate underwriting leverage. In addition, SHKPI’s operating performance has been strong and consistent. Over a five-year period, underwriting and investment results of SHKPI have been consistently positive, contributing to an average combined ratio under 75% and an average operating ratio below 50%.
As a wholly owned subsidiary of SHKP, SHKPI mainly underwrites risks associated with SHKP-related construction projects on a direct basis, which makes its acquisition cost ratio generally lower than its peers. The book of business sourced from SHKP and its related entities has provided SHKPI with a stable presence in Hong Kong’s non-life insurance market, particularly in the employees’ compensation segment.
SHKPI’s risk profile is classified as high investment risk, given its scope of operations and investment allocations. Nevertheless, AM Best considers SHKPI’s risk management capabilities to be aligned appropriately with its risk profile. This is due primarily to the company’s strong focus on profitable underwriting, low net retention, and the business and investment management support it receives from SHKP.
The stable outlooks reflect AM Best’s expectation that SHKPI’s operating performance will remain at a strong level, underpinned mainly by its continued focus on profitable underwriting, low acquisition costs and positive investment returns. Negative rating actions could occur if the company experiences material and continual deterioration in its risk-adjusted capitalization or exhibits an unfavorable trend in operating performance.[the_ad id=”31605″]