Share recommendations for AM Best Affirms Credits of China Merchants Insurance Company Limited

HONG KONG–(BUSINESS WIRE)–AM Best has confirmed the Financial Strength Test of A- (Excellent) and the Long-Term Credit Rating of “a-” (Good) for China Merchants Insurance Company Limited (CMI) (Hong Kong). The loan format (parts) is fixed.

These ratings reflect the strength of CMI’s paper, which AM Best considers to be very strong, as well as its operational efficiency, its limited business history and sound business management. The ratings also reflect parent support from China Merchants Group Limited (CMG), including financial support, brand recognition, financial management and risk management.

CMI’s capital adequacy assessment is driven by its risk-adjusted capital adequacy ratio, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and assets continued to grow in 2021 due to the retention of the entire operating profit. The company maintained a conservative investment strategy, with most of its assets allocated to cash, bank deposits and short-term bonds. Businesses are increasing as the number of businesses is increasing. The reinsurance program remains limited to those with good credit.

CMI’s performance was good in 2021, with a profit after tax of HKD 29 million (USD 3.7 million), supported by good records and financial results. The company has been profitable over the past five years with an average return of 4.2% (2017-2021). The registration results showed a positive change in 2021, with a combined rate of 84.9%, mainly supported by better claims for the year. The increase in reinsurance commissions also helped to moderate the decline in management interest rates. The increase in interest rates over the past five years also contributed to the company’s positive and stable corporate results, although yields remained low.

CMI maintained a stable-low market share in the Hong Kong insurance market. The company’s writing portfolio was diverse. Premiums grew by 11.8% in 2021, mainly driven by maritime, property and credit businesses, while risk performance continued to be reduced due to travel restrictions under the COVID-19 pandemic.

Although the CMI is good at its current level, a negative correction may occur if the company experiences a financial loss in the company’s risk-adjusted business or its profitability due to difficulties in writing or financial results. A deterioration in the credit history of the last company, CMG, could also affect CMI’s ratings.

Ratings are given to organizations that have been rated before they are published. Unless otherwise stated, the ratings have not been changed following this communication.

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