A.M. Best Affirms Ratings of BOC Group Life Assurance Company Limited

  A.M. Best Affirms Ratings of BOC Group Life Assurance Company Limited

Business Wire

HONG KONG -- July 12, 2013

A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of A
(Excellent) and issuer credit rating of “a” of BOC Group Life Assurance
Company Limited (BOCGL) (Hong Kong). The outlook for both ratings is stable.

The ratings of BOCGL reflect its improved capitalization and leading market
position in Hong Kong. The ratings also recognize the strong operational and
capital support provided by its banking parent, BOC Hong Kong (Holdings)
Limited (BOCHK). BOCGL generates business mainly via bancassurance channels
established within the BOCHK banking network in Hong Kong.

BOCGL has enhanced its risk-adjusted capitalization and local solvency mainly
through its enlarged capital and surplus, which is attributable to its
improved investment earnings. The reduction of its investment risk has
significantly improved its risk-adjusted capital position. As a pioneer in the
Renminbi (RMB)-denominated life insurance in Hong Kong, BOCGL’s co-insurance
arrangement with a leading reinsurer in China, provides it with the capacity
to achieve economies of scale through sizeable business volume with manageable
market risk.

Offsetting these positive rating factors include the extended counterparty
risk arising from the shift of product mix and potential volatility in BOCGL’s
regulatory solvency. While BOCGL improved its premium mix by diversifying into
longer-term RMB products, its counterparty exposure could be prolonged as most
RMB products are ceded out to a single reinsurer. Notwithstanding, appropriate
measures are in place to mitigate such counterparty risk. Currently, BOCGL’s
premium mix is comprised largely of short to medium-term savings products, and
its regulatory solvency is expected to be exposed to volatility arising from
policy reserves of interest-sensitive products given its moderate solvency
buffer.

Positive rating actions may occur if BOCGL manages to improve the
profitability of its new business and product mix while maintaining a strong
business profile. Downward rating pressure could arise if there is a
significant deterioration in the company’s risk-adjusted capitalization in the
event of adverse financial market movements and heightened counterparty risk.

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. Best’s Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.

Ratings are communicated to rated entities prior to publication, and unless
stated otherwise, the ratings were not amended subsequent to that
communication.

A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company. A.M. Best
Company is the world’s oldest and most authoritative insurance rating and
information source. For more information, visit www.ambest.com.

       Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:

A.M. Best
Vivian Cheung, +852-2827-3411
Financial Analyst
vivian.cheung@ambest.com
or
Moungmo Lee, +852-2827-3402
General Manager
moungmo.lee@ambest.com
or
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
 
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