HONG KONG--(BUSINESS WIRE)--
A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) and issuer credit rating of “a-” of Luen Fung Hang
Insurance Company Limited (LFH) (Macau). The outlook for both
ratings is stable.
The ratings reflect LFH’s multi-channel sales model, profitable
underwriting results in most business lines and stable interest income
from fixed-income assets.
LFH’s business generation relies increasingly on the bank channel by
leveraging its banking shareholders’ background. Bancassurance has been
the primary source of its fire insurance business. Direct marketing is
another major channel, focusing on motor and medical insurance products.
These two channels, along with broker and agency teams, contributed to
LFH’s strong premium growth and diversified product risk exposure.
The company has consistently recorded underwriting profits, attributable
to satisfactory loss experience from the core medical and fire insurance
portfolios. Improved claim results from the employees’ compensation
business further reduced LFH’s overall loss ratio in 2011. Together with
a manageable expense level and stable interest income from bond
investments, LFH was able to retain profits to gradually grow its
One negative rating factor is LFH’s high claim cost from its motor
insurance business. The constant high loss ratio in this segment partly
offsets the favorable experience of the company’s other lines of
business. The regulatory changes to raise the minimum amount of the
total insured in compulsory motor insurance in 2011 imposes higher
uncertainties in the future performance of the motor insurance portfolio.
LFH’s buffer level of risk-adjusted capitalization, although remaining
supportive of its current ratings, is slightly less than its peers. LFH
is exposed to potential volatility with respect to significant losses.
While the outlook for LFH’s ratings is stable, positive rating actions
could occur as a result of better underwriting performance from the
motor business and continued surplus accumulation through profit
retention. Downward rating pressure could arise if there is a
significant deterioration in the company’s risk-adjusted capitalization
should major loss events occur.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include:
“Understanding Universal BCAR”; “Risk Management and the Rating Process
for Insurance Companies”; and “Catastrophe Analysis in A.M. Best
Ratings.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Co.Michael WongSenior Financial
MorrowSenior Manager, Public Relations+(1)
908-439-2200, ext. firstname.lastname@example.orgJim
PeavyAssistant Vice President, Public Relations+(1)
908-439-2200, ext. email@example.com
Source: A.M. Best Co.