A.M. Best Upgrades Ratings of Sun Hung Kai Properties Insurance Limited
HONG KONG -- March 12, 2013
A.M. Best Asia-Pacific Limited has upgraded the financial strength rating to A
(Excellent) from A- (Excellent) and issuer credit rating to “a” from “a-” of
Sun Hung Kai Properties Insurance Limited (SHKPI) (Hong Kong). The outlook for
both ratings is stable.
The upgrades reflect SHKPI’s consistently favorable underwriting performance
and investment performance, and its strong risk-adjusted capitalization.
SHKPI recorded an average combined ratio of approximately 57% over the past
five years under management’s prudent underwriting strategy. The company’s
historical underwriting income was mainly underpinned by favorable performance
of the employees’ compensation business generated from both group-related and
third party construction projects. Moreover, its low acquisition cost of
group-related business and stable reinsurance commission income also
contributed essentially to its favorable underwriting performance.
SHKPI leveraged on the investment arm of its parent company, Sun Hung Kai
Properties Limited, when selecting an investment that offers satisfactory
returns relative to its risk profile. SHKPI consistently achieved a positive
investment performance over the past few years.
SHKPI’s capitalization remains solid and supportive of the current ratings on
both an absolute and risk-adjusted basis. The company’s surplus was steadily
strengthened through the retention of after-tax net profits despite its
historical high dividend payouts.
Offsetting rating factors include the potential high earnings volatility
associated with investment performance. Throughout the past five years, the
company’s investment income was largely supported by material realized gains
on the disposal of various private equity investments and gains from property
revaluation. The company’s future investment return may be lower than its
historical level in view of the expected completion on the disposal of its
private equity investment portfolio in the coming years, while any potential
negative revaluation from the current value of its investment properties could
also unfavorably impact its future investment earnings. Notwithstanding,
SHKPI’s current level of capitalization remains adequate to absorb potential
earnings volatility over the short to medium term.
SHKPI is well placed for its current ratings. Factors leading to negative
rating actions includethe substantial deterioration in its risk-adjusted
capitalization due to operating losses, and/or excessive risks taken from
underwriting and/or investment activities.
The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Key criteria utilized include: “Risk Management and the Rating
Process for Insurance Companies”; “Understanding Universal BCAR”; and
“Catastrophe Analysis in A.M. Best Ratings.” Best’s Credit Rating Methodology
can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more information,
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Company
Vivian Cheung, +852-2827-3411
Moungmo Lee, +852-2827-3402
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
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