HONG KONG–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Blue Cross (Asia-Pacific) Insurance Limited (Blue Cross) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Blue Cross’ balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Blue Cross’ balance sheet strength is underpinned by consolidated risk-adjusted capitalisation that is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as its strong liquidity and low reinsurance dependency. The company has a prudent investment strategy with a majority of its invested assets allocated to investment grade fixed income securities.
Blue Cross’ strong operating performance is demonstrated by a five-year weighted average return-on-equity ratio of 19.3% (2016-2020), as calculated by AM Best. The company reported an after-tax net profit of HKD 241.4 million, supported mainly by its stable investment income and improved underwriting performance, which contributed to a lower combined ratio of 80.8% in 2020 (2019: 94.3%). Despite premium contraction in 2020, the company grew its underwriting profit on lower claims frequency, particularly from the medical insurance book, amid the COVID-19 environment. AM Best expects the one-off improvement in loss experience to revert to a historical level that will normalise the underwriting profit trend over the short to intermediate term.
Blue Cross, a wholly owned subsidiary of The Bank of East Asia, Limited (BEA), maintained a strong presence in Hong Kong’s general insurance market in 2020 and ranked among the top 20 insurers in terms of gross premium written. It also ranks among that market’s top five insurers in the accident and health (A&H) segment due to its focus on medical insurance services. During fiscal-year 2020, the company’s underwriting portfolio contained mainly A&H business, as most of its retained premium was from medical insurance, which contributed over 80% of total net premium written. AM Best considers the company’s distribution network to be diversified with its management proactively making use of technology initiatives in daily business operations.
On 24 March 2021, Blue Cross entered a portfolio transfer agreement that will result in its residual long-term life business portfolio being transferred to BEA Life Limited. The transfer is conditional on the scheme of transfer being sanctioned by the Hong Kong court.
The stable outlooks reflect AM Best’s expectation that Blue Cross will maintain its very strong balance sheet assessment. The upcoming transfer of the residual life business is expected to have minimum impact to its overall credit fundamentals, which AM Best believes will remain at the strong level over the intermediate term.
Negative rating actions could occur if there is significant deterioration in Blue Cross’ risk-adjusted capitalisation or operating performance due to a contraction in operating profit.
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 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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