S&P Upgrades Ming An’s Ratings to ‘BBB’ after Reinsurance Payment

July 6, 2006

Standard & Poor’s Ratings Services has raised its counterparty credit and insurer financial strength ratings on Ming An Insurance Co. (Hong Kong) Ltd. to “BBB” from “BB+” after the company was paid a long outstanding reinsurance debt of HK$886 million (U.S.$114 million) by a single reinsurer. The outlook is positive.

“Previously, we considered part of the sum owed to be doubtful debt,” stated S&P credit analyst Connie Wong. “The settlement of the full amount, which accounts for about 54 percent of the company’s total shareholders’ funds, has substantially enhanced Ming An’s financial profile, which in any event had been improving in recent years,” she added.

S&P said: “The improvements of the past few years are mainly attributable to rising capitalization driven by greater profitability as a result tighter underwriting and the release of redundant reserves. Ming An’s combined ratio improved to 67 percent at the end of 2005 from 95 percent at the end of 2004 and 102 percent at the end of 2003. Moreover, its ratio of shareholders’ funds to net premium income increased to 176 percent at the end of 2005 from 154 percent a year earlier.

“Ming An’s investment profile is highly concentrated, with property accounting for 42 percent of its total invested assets. The company’s exposure to equity remains significant and accounted for about 14 percent of its invested assets at the end 2005. These concentrations are, however, partly offset by a large portfolio of cash and good quality bonds, which accounted for about 44 percent of the company’s total invested assets at that date.”

“Ming An was Hong Kong’s fourth-largest nonlife insurance company in terms of gross premiums in 2005. Although this market position remains good, its market share in terms of gross premiums fell significantly to 3.2 percent in 2005 from 6.7 percent in 2002. This was mainly a result of tightening underwriting controls and the company’s policy of focusing on profit rather than market share.”

S&P indicated that its “positive outlook reflects the expectation that Ming An’s business and financial profile will further improve as a result of better underwriting controls and the company’s improving balance sheet. The ratings on Ming An may rise if the company’s operating performance and financial flexibility continue to strengthen. The outlook may, however, be revised to stable if the company’s financial profile shows no further improvement.”

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