A.M. Best Affirms Rating of HSBC Life (International) Limited; Assigns Issuer Credit Rating.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and assigned an issuer credit rating of "aa-" to HSBC HSBC Hongkong and Shanghai Banking Corporation HSBC Humane Society of Broward County (Florida) HSBC Humane Society of Bay County (Bay County, Michigan) Life (International) Limited (HSBC Life) (Bermuda). The outlook for both ratings is stable. The ratings reflect HSBC Life's improved risk-adjusted capitalization, extensive distribution capabilities, strong earnings growth and sustainable profitability in the Mandatory Provident Fund Mandatory Provident Fund (Traditional Chinese: 強制性公積金), often abbreviated as MPF (強積金), is a compulsory saving scheme for the retirement of residents in Hong Kong. (MPF MPF mitosis-promoting factor. ) business. HSBC Life is ultimately owned by HSBC Bank, the largest banking group in Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. . The company distributes products through the extensive branch network of its parent in Hong Kong. The bancassurance Bancassurance A French term referring to the selling of insurance through a bank's established distribution channels. Notes: The result is a bank that can offer banking, insurance, lending, and investment products to a customer. distribution channel has allowed HSBC Life to develop a sustainable edge over its competitors in acquiring new business and servicing existing customers. Continued penetration into HSBC Bank's customer base is expected to further enhance HSBC Life's profitability and business growth. Best's Capital Adequacy Ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. , which measures capitalization on a risk-adjusted basis, indicates that HSBC Life's capitalization has improved since fiscal year 2004 due primarily to full retention of the net profit for the fiscal year. Additionally, slower growth in ordinary life business in 2005 eased pressure on HSBC Life's capital. The embedded value Embedded Value A common valuation measure used outside North America particularly in the insurance industry. It is calculated by adding the adjusted net asset value and the present value of future profits of a firm. of HSBC Life's individual life portfolio also rose significantly in 2005, which is in line with the growth in individual life business. Additionally, MPF fee income increased significantly in 2005. These positive factors are partially offset by the continued pressure on HSBC Life's risk-adjusted capital and strong market competition. Although the company's risk-adjusted capitalization improved over the last year, it continues to be capitalized at a lower level than similarly rated companies. Further, pressure on HSBC Life's capital is expected to remain due to rapid growth in the individual life business. A.M. Best views the ongoing commitment of HSBC Bank as critical to HSBC Life's ability to support further business growth. Strong market competition in the life insurance industry will result in further consolidation. This may lead to price competition and subsequently lower profitability. In addition, changes in MPF providers may occur when employees begin to notice divergence in the investment performance of different fund managers. For Best's Ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. , an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion