A.M. Best Affirms Ratings of Sun Hung Kai Properties Insurance Limited

  A.M. Best Affirms Ratings of Sun Hung Kai Properties Insurance Limited

Business Wire

HONG KONG -- March 11, 2014

A.M. Best has affirmed the financial strength rating of A (Excellent) and
issuer credit rating of “a” of Sun Hung Kai Properties Insurance Limited
(SHKPI) (Hong Kong). The outlook for the ratings remains stable.

The rating affirmations reflect SHKPI’s favorable operating performance and
strong risk-adjusted capitalization. The company also benefits from the
business and investment support as a wholly-owned subsidiary of Sun Hung Kai
Properties Limited (SHKP), one of the leading property conglomerates based in
Hong Kong.

SHKPI generated over half of its underwriting business from SHKP-related
construction projects, of which most are comprised of employees’ compensation
(EC) business with minimal acquisition costs. The company’s investment
portfolio is managed under the investment arm of SHKP. Favorable investment
performance was demonstrated through its track record in selecting investments
that offered satisfactory returns relative to its risk profile.

These positive factors are partially offset by the decrease in SHKPI’s
underwriting margin, potential negative revaluation on investment properties
and relatively high concentration on below-investment grade bonds within its
fixed income portfolio. Although SHKPI consistently achieved profitable
underwriting results, the increase in the frequency of smaller claims had
elevated the company’s retained losses and net loss ratio over the past two
years. Acquisition costs had also increased since the company became more
active in expanding into third party business since 2011.

SHKPI is well positioned at its current rating level. Negative rating pressure
may occur if the company demonstrates significant and continued deterioration
in underwriting results and/or investment losses that lead to a substantial
decline in its risk-adjusted capitalization.

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.

This rating announcement has been issued by A.M. Best Asia-Pacific Limited,
which 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 © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:

A.M. Best Co.
Vivian Cheung, +852-2827-3411
Senior 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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