AM Best Affirms Credit Ratings of Hong Leong Insurance (Asia) Limited

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Hong Leong Insurance (Asia) Limited (HLIA). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect HLIA’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

HLIA’s very strong balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which was at the strongest level in fiscal year-end 30 June 2024 (FY2024), as measured by Best’s Capital Adequacy Ratio (BCAR). The company has achieved a moderate pace of capital and surplus (C&S) growth over the past five fiscal years while maintaining low underwriting leverage. It has also maintained a healthy solvency ratio with an ample buffer above the regulatory minimum. Offsetting factors include HLIA’s modest C&S level, relatively high dependency on reinsurance, and its investment concentration in real estate properties.

AM Best views HLIA’s operating performance as strong, which is supported by the better-than-average underwriting profitability. The company continued to report double-digit growth in gross premiums written in FY2024, primarily driven by a recovery in the domestic helper and travel insurance segments. Going forward, AM Best expects HLIA to benefit from continued growth momentum in its top line and improved operational efficiency, which should help stabilise the expense ratio and contribute to a higher underwriting margin. Prospective investment performance is expected to be less volatile compared with the fair value movement of listed shares, following the company’s efforts to achieve a more diversified and stable portfolio by investing in fixed-income securities starting from FY2024.

HLIA’s business profile is assessed as limited. The company’s presence in Hong Kong’s general insurance market remains modest with a stable market share. The company’s portfolio is skewed toward personal lines products, including domestic helper and travel insurance via direct channels, including its call centre. In recent years, HLIA has expanded its portfolio into commercial lines via the broker channel, and is also exploring the potential in serving small and medium-sized businesses. Other successful initiatives include the cross-selling of personal insurance to its existing client base, and digitalisation of underwriting and claims process to improve customer experience and increase client retention.

Negative rating actions could occur if HLIA’s operating performance deviates materially from the business plan, for example, due to consistently material lower investment yields or a diminished underwriting margin. Negative rating actions also could arise if there is significant deterioration in the company’s risk-adjusted capitalisation. Although not likely in the short to medium term, positive rating actions could occur if HLIA achieves material improvement in business profile; for example, a significant strengthening of its market position, while maintaining strong operating performance.

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

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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