A.M. Best Affirms Rating of Hang Seng Insurance Company

December 12, 2002

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of Hong Kong- based Hang Seng Insurance Company Limited with a “stable” outlook.

“The current rating reflects the company’s prudent capitalization, solid operating performance and superior distribution capabilities. The tremendous franchise value of Hang Seng Bank has provided the company with a competitive advantage in attracting new customers and retaining existing ones,” said Best.

Best noted that Hang Seng was “prudently capitalized, as demonstrated by the Best’s Capital Adequacy Ratio (BCAR), which measures capitalization on a risk-adjusted basis. Although net premium leverage rose from 0.23 times in 2000 to 0.33 times in 2001, the current level is still considered to be conservative.”

It’s also been successful with its Bancassurance operations, which are its “primary sales channel.” It noted that “In 2001, the company posted a loss ratio and expense ratio of 31.0% (including movements in the inward treaty insurance fund) and 48.1%, respectively. The loss ratio is considerably better than the market average of 61.7%. With its superior underwriting performance, return on assets and return on equity have been maintained at relatively high levels.”

Best did indicate that the Hang Seng’s exposure to Hong Kong’s equity market and heavy dividend obligations should be considered as “offsetting factors.”

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