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Saturday December 29, 12:41 PM
A.M. Best Affirms Ratings of Wing Lung 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 of "a-" of Wing Lung Insurance Company Limited (WLI) (Hong Kong). The outlook for both ratings is stable.
The ratings reflect the company's continued improvement in its risk-adjusted capitalization, stable overall operating performance and consistently conservative investment strategy.
WLI's net earnings were strong in 2006, with after-tax profits of HKD 115 million (approximately USD 15 million) from HKD 72 million (approximately USD 9 million) the previous year. This favorable performance predominately resulted from a significant increase in investment income in 2006. Its return (after-tax) on equity (ROE) averaged 13.1% during 2002-06.
The company experienced a slight increase in net loss ratio to 61.7% in 2006 from 59.2% in 2005, although its overall underwriting profitability remained sound. Its combined ratio stood at 92.5% as of September 2007 (compared to 91.5% in 2006). Given its existing underwriting discipline, WLI's underwriting profitability is likely to remain stable in the near term.
WLI maintains a highly liquid investment portfolio, with cash, bank deposits and bonds accounting for 69% of its total assets in 2006. Favorable investment returns from its conservative investment strategy will continue to contribute to its bottom line.
The company's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), continues to trend upward. Stronger growth in the company's capitalization has resulted in a further reduction of net premium leverage in 2006. The net premium leverage ratio decreased to 0.71 times in 2006 from 0.82 times in 2005. A.M. Best anticipates that moderate business growth along with high retention of operating earnings will further lead to a persistent improvement in the company's risk-adjusted capitalization.
Offsetting rating factors include the continued deterioration in underwriting performance of its employees' compensation (EC) line of business and heavy reliance in its general liability business.
The underwriting performance of WLI's EC business remained unfavorable, with a combined ratio of 108.5% as of September 2007 (compared to 106.8% in 2006). As WLI focuses on EC business (which accounted for 48% of its premium portfolio in 2006), further deterioration in premium rates and significant adverse claims development could further challenge its underwriting margin.
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 Company
Analysts
Stella Ng
+852-2827-3407
stella.ng@ambest.com
or
Terrence Wong
+852-2827-3403
terrence.wong@ambest.com
or
Public Relations
Jim Peavy
+(1) 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow
+(1) 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
CONTACT:
A.M. Best Company
Analysts
Stella Ng
+852-2827-3407
stella.ng@ambest.com
or
Terrence Wong
+852-2827-3403
terrence.wong@ambest.com
or
Public Relations
Jim Peavy
+(1) 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow
+(1) 908-439-2200, ext. 5378
rachelle.morrow@ambest.com
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