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Saturday December 29, 11:45 AM
A.M. Best Affirms Rating of Dao Heng Insurance Company Limited |
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Oldwick, New Jersey, United States, Saturday, December 29, 2007 -- (Business Wire India) -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating (ICR) of "a-" of Dao Heng Insurance Company Limited (DHI). The outlook for both ratings is stable.
The ratings reflect DHI's consistently profitable underwriting results, strong risk-adjusted capitalization and management's efforts to expand the company's revenue sources.
DHI's level of capitalization on an absolute and risk-adjusted basis, as measured by Best's Capital Adequacy Ratio (BCAR), remained strong to support the risks underwritten. Its net premium leverage ratio further improved to 0.31 times in fiscal year 2007 from 0.42 times in fiscal year 2006. Prospectively, A.M. Best expects that the company's risk-adjusted capitalization to remain strong over the next two years, albeit somewhat weaker than in fiscal year 2007, due mainly to anticipated premium growth.
The company's operating performance improved as evidenced by consistently profitable underwriting results and strong investment income in fiscal year 2007. The company recorded an average return on equity of 38.5%, primarily due to a significant realized gain on the sales of listed equities during the year. The combined ratio stood at 89.3% in fiscal year 2007, averaging 87.5% during fiscal years 2003-07. Given its focus on personal lines, DHI is expected to maintain its underwriting profitability in the near term, despite the continued soft market environment in Hong Kong.
These positive rating factors are somewhat offset by DHI's increased exposure to equities and limited market presence.
In view of favorable equity market environment, the company reallocated its assets by increasing its equity exposure in 2007. Equities accounted for 27% of total assets at fiscal year-end 2007 as compared to 18% at year-end 2006. Nonetheless, any further increase in equities exposure could translate into a higher level of volatility in the company's operating earnings, although its net premium leverage remains low to withstand potential asset risk.
DHI disseminates personal risk products mainly through the in-house call center. Given its small market presence in the Hong Kong non-life market, the growth of the company's insurance book will be highly dependent upon its capability to strengthen its distribution platform and diversify its premium source over the mid to long term.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
Media contact details
CONTACT:
A.M. Best Co.
Analysts
Stella Ng
+852-2827-3407
stella.ng@ambest.com
Terrence Wong
+852-2827-3403
terrence.wong@ambest.com
or
Public Relations
Jim Peavy
+(1) 908-439-2200, ext. 5644
james.peavy@ambest.com
Rachelle Morrow
+(1) 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
CONTACT:
A.M. Best Co.
Analysts
Stella Ng
+852-2827-3407
stella.ng@ambest.com
Terrence Wong
+852-2827-3403
terrence.wong@ambest.com
or
Public Relations
Jim Peavy
+(1) 908-439-2200, ext. 5644
james.peavy@ambest.com
Rachelle Morrow
+(1) 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
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