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AM Best Affirms Credit Ratings of Luen Fung Hang Insurance Company Limited

HONG KONG–()–AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Luen Fung Hang Insurance Company Limited (LFH) (Macau). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect LFH’s 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.

LFH’s balance sheet strength continues to be supported by a robust level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus continues to grow organically through partial profit retention in the past few years, supported by a track record of positive operating results. The company’s investment strategy remains conservative and liquid, with a majority of the investment assets in bonds, bank deposits and cash. Notwithstanding, the company has a small exposure of unlisted debts and equities. Going forward, AM Best expects the company’s investment strategy will remain conservative and stable. The company’s reinsurance dependency remains moderately high with a premium retention ratio of 46% in 2020. Nevertheless, the company’s reinsurers panel remains in good credit quality.

LFH’s continues to demonstrate a track record of strong operating performance in 2020, supported by positive underwriting and investment results. The company’s net combined ratio improved to 61% from 67% in 2020, mainly contributed to an improvement in the company’s net commission ratio, while partially offset by a slight increase in net loss ratio and management expense ratio. The company’s investment portfolio continues to generate stable and positive investment income through a stable stream of interest and dividend income.

LFH maintained second place in Macau’s non-life insurance market in 2020, with a market share of 23.7% in terms of gross premium written. The company’s underwriting portfolio is moderately diversified, with a majority of the business in fire and medical. Notwithstanding, the company’s business remains concentrated in Macau, which increases the company’s exposure in geographic concentration risk. The company continues to leverage the distribution channel support from its bank shareholders and maintains a competitive edge in acquiring good quality business through the bancassurance channel.

LFH is well-positioned for its current ratings. Negative rating actions could occur if the company’s operating performance exhibits a material and deteriorating trend in profitability such that it no longer supports a strong assessment, or if LFH’s risk-adjusted capitalisation experiences a significant deterioration.

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

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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