A.M. Best Affirms Rating of Sun Hung Kai Properties Insurance Limited; Assigns Issuer Credit Rating.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and assigned an issuer credit rating of "a-" to Sun Hung Kai Sun Hung Kai Properties Ltd. (新鴻基) (HKSE: 0086 ) is a listed corporation based in Hong Kong. The company is controlled by the 3 Kwok brothers, whose father, Kwok Tak Seng, founded the company. Collectively, they speak for 43. Properties Insurance Limited (SHKPI) (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 outlook for both ratings is stable. The ratings reflect SHKPI's satisfactory risk-adjusted capitalization, strong distribution support from its parent company, Sun Hung Kai Properties Ltd., high liquidity and consistently positive operating results. SHKPI's underwriting performance improved further in fiscal year 2005, with the overall loss ratio decreasing to 73.9% from 82.5% last year. The investment income and reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. commission income have pushed the company's operating ratio Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: down from 46.3% in fiscal year 2004 to 30.8% in fiscal year 2005. SHKPI has maintained a satisfactory capital position given its low retention of risks written. The net adjusted premium leverage ratio decreased further to 0.46 times in 2005, falling within a comfortable margin to offset any short-term pressure on underpricing Underpricing Issuing securities at less than their market value. underpricing The pricing of a new security issue at less than the prevailing price of the same security in the secondary market. Underpricing helps ensure a successful sale. or increase in losses. The consistent positive operating results have strengthened the company's capital and surplus with an average growth of 14.3% over the past five years. With approximately 51.2% of total assets allocated to cash and deposits at the end of fiscal year 2005, the company maintains a high liquidity position with regard to the risks underwritten. Leveraging the parent company's support, SHKPI derives significant benefits of business generated from in-house and associated companies associated company associate n → Partnerfirma f associated company n → società collegata . The substantial support from the group business has provided the company with a fair degree of flexibility on building a quality and steady portfolio. Offsetting factors include significant private equity investments, heavy concentration on liability business and the deteriorating profitability of the liability business. While A.M. Best recognizes SHKPI's private equity investment exposure, the company's recent increase of private equity investments in two newly established China insurers in fiscal year 2004 lessens its financial flexibility. Although SHKPI's risk-adjusted capitalization, which is measured by 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. , indicates an adequate solvency margin to support its current rating, any further substantial private equity investments would burden the risk-based capitalization. Historically, SHKPI has a high degree of concentration on liability business, especially the employees' compensation (EC) sector, which represents about 88% of the portfolio on a net premium basis. Prospectively, the continuing softened premium rates in EC and the general liability line could have a negative effect on the company's underwriting profit Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums. in the near term. 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