HONG KONG–(BUSINESS WIRE)–AM Best affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of ‘a-‘ (Excellent) of Macau Insurance Company Limited (MIC) (Macao). The outlook for these credit ratings (ratings) is stable.
The ratings reflect the strength of MIC’s balance sheet, which AM Best rates as very strong, as well as its adequate operating performance, neutral business profile and appropriate corporate risk management.
MIC’s balance sheet strength continues to be supported by its risk-adjusted capitalization, which remains at its strongest level as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus continued to grow organically in 2021, supported by positive operating results and full profit retention, as well as capital gains from the company’s investment assets. Although MIC’s strategic asset allocation reflects an appetite for investing in equity securities, which exposes its overall earnings to equity market volatility, downside risks are partially mitigated by the company’s significant level of excess capital.
MIC continues to rank third in the Macau non-life insurance market, with a market share of 10.4% in terms of gross premium written. The company’s underwriting portfolio remains moderately diversified with core business lines in property, medical, workers’ compensation and auto. For fiscal 2021, despite a reduced premium base that caused net underwriting profit to shrink, the overall net combined ratio remained at a healthy 89%. In the short term, MIC’s topline performance may continue to be impacted by a number of external challenges, such as the economic slowdown in Macau and near-term uncertainty in the local gaming industry. Nevertheless, AM Best expects the company to continue with its business plan to maintain insurance profitability by expanding its more profitable business; tightening practices for signing unprofitable businesses; active claim cost management; improving digital capabilities; and improving operational efficiency.
Positive rating actions could occur if MIC demonstrates successful execution of its business plan to achieve sustained improvement and stability in its operating results while maintaining a stable level of risk-adjusted capitalization. Negative rating actions could occur if MIC’s operating results suffer a material deterioration due to unfavorable investment results or significantly weaker underwriting performance. Negative rating actions may also occur if MIC’s business profile exhibits a sustained downward trend that materially deviates from stated plans.
Ratings are communicated to rated entities prior to publication. Unless otherwise stated, ratings have not changed since this announcement.
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