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 SHKPIs 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.
SHKPIs risk-adjusted capitalization, as measured by Bests Capital Adequacy Ratio (BCAR), is categorized as being at the strongest level, underpinned by its low net retention and moderate underwriting leverage. In addition, SHKPIs 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 Kongs non-life insurance market, particularly in the employees compensation segment.
SHKPIs risk profile is classified as high investment risk, given its scope of operations and investment allocations. Nevertheless, AM Best considers SHKPIs risk management capabilities to be aligned appropriately with its risk profile. This is due primarily to the companys strong focus on profitable underwriting, low net retention, and the business and investment management support it receives from SHKP.
The stable outlooks reflect AM Bests 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.
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 Bests 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 Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.
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