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AM Best Affirms Credit Ratings of China Merchants Insurance Company Limited
[June 26, 2020]

AM Best Affirms Credit Ratings of China Merchants Insurance Company Limited

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" of China Merchants Insurance Company Limited (CMI) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect CMI's balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the parental support from China Merchants Group Limited (CMG).

CMI's very strong balance sheet strength assessment is underpinned by its robust level of risk-adjusted capital, as measured by Best's Capital Adequacy Ratio (BCAR). Following a capital injection of HKD 207 million (USD 26.6 million) from its parent company in 2016 and full profit retention over the past few years, the company's solvency stood at a very healthy level as of year-end 2019. As of year-end 2019, the company's investment portfolio mainly consisted of bonds and cash. While the company's bond investments contained a moderate level of exposure to non-investment grade and non-rated bonds, a majority of these securities were issued by multi-national banks and large-sized Chinese state-owned enterprises. AM Best expects the company to continue to closely monitor and refine the credit quality of its bond portfolio through prudent investment selection.

CMI's operating performance remained positive and has improved over the past few years. The company recorded an after-tax operating profit of HKD 11 million (USD 1.4 million) in 2019, with a return on equity of 3.5%. Despite a positive operating performance in 2019, the company exhibited an underwriting loss with a net combined ratio slightly over 100%, although this has been improving gradually. The company's claims experience was better than the industry average, albeit partially offset by its relatively high expenses. Notwithstanding, the company has been refining its underwriting portfolio and utilising a lower cost broker channel to expand its commercial business, which has resulted in a decrasing expense ratio in recent years. CMI's investment income continued to offset the company's underwriting loss and support overall operating profitability through stable streams of interest income from its investment portfolio.

CMI maintained a stable yet small market presence in Hong Kong's non-life insurance market, with a market share of 0.38% in 2019, in terms of gross premium written. CMI continues to diversify its underwriting portfolio by expanding its commercial business. In particular, the marine line of business was a major growth driver of premium revenue in 2019 and is expected to contribute to the company's business growth over the short to intermediate term.

Although CMI is well-positioned at its current rating level, negative rating actions could occur if the company experiences a material deterioration in its risk-adjusted capitalisation or its operating profitability. A deterioration in the credit profile of the ultimate parent company, China Merchants Group Limited, may also impose a negative impact on the ratings of China Merchants Insurance Company Limited.

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 media use of Best's Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and AM Best Rating Action Press Releases.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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