A.M. Best Affirms Ratings of Ageas Insurance Company (Asia) Limited

HONG KONG--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Ageas Insurance Company (Asia) Limited (AICA) (Hong Kong). The outlook for both ratings is stable.

The ratings reflect AICA’s solid risk-adjusted capitalization. The parent group, Ageas N.V., injected USD 130 million in 2011 to strengthen AICA’s capitalization and solvency. Unrealized investment gains from the company’s available-for-sale fixed income asset portfolio increased its capital further.

AICA’s distribution channels were developed with higher productivity. The number of agents and the volume of new business generated rebounded consistently after the global financial crisis in 2008. The new independent financial advisor channel grew steadily to contribute around one-fifth of new premium in 2011. The balanced product package was able to meet the market needs.

The prudent investment strategies of AICA reduced its exposure to risky assets. Low equity exposure protected the company from a severe capital loss under a weak equity market performance in 2011. The asset portfolio was highly liquid, with most assets allocated in investment-graded fixed income securities.

These positive rating factors are partially offset by AICA’s volatile statutory solvency ratio. The solvency ratio dropped during 2011 as the company had to increase its reserves due to the fall in the U.S. Treasury rate. The long duration of product liability led to high interest rate risk exposure for the company given the limited choice of assets with a similar duration.

AICA faced difficulties to maintain its target investment yield and to develop new long-term life insurance products amid the current historical low interest rate environment. The changes in interest rates and market conditions last year reduced value of inforce business.

While the ratings for AICA are stable, there may be positive rating actions if improved asset and liability management framework is in place, in conjunction with stable risk-adjusted capitalization and a stable solvency ratio. Downward rating pressure could arise if there is a significant deterioration in the company’s risk-adjusted capitalization in the event of adverse financial market movements.

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” and “Risk Management and the Rating Process for Insurance Companies.” 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.

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A.M. Best Co.
Michael Wong
Senior Financial Analyst
+852-2827-3418
michael.wong@ambest.com
or
Moungmo Lee
General Manager
+852-2827-3402
moungmo.lee@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
+(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com

Source: A.M. Best Co.