S&P Raises Ming An Insurance Co. Ratings to ‘BB’

August 19, 2004

Standard & Poor’s Ratings Services announced that it has raised its insurer financial strength and counterparty credit ratings on Hong Kong-based Ming An Insurance Co. Ltd. to ‘BB’ from ‘BB-‘. The outlook on the ratings is stable.

“The rating action reflects a significant improvement in the company’s operating performance as a result of tightened underwriting controls and its improved financial profile,” said S&P, adding, however that the insurer’s capitalization remains weak.

S&P noted: “The ratings reflect Ming An’s below-average asset portfolio, which contains a high concentration of property investments. The company has, however, a large portfolio of liquid assets, including cash and deposits. The ratings also reflect implicit support from the company’s immediate parent, China Insurance Hong Kong (Holdings) Co. Ltd. (CIHK).”

S&P said the stable outlook reflects its “expectation that management’s commitment to profitability will gradually improve its balance sheet over the medium term. Ming An’s market position remains satisfactory although its market share in terms of gross domestic premiums fell significantly to 4.2 percent in 2003 from 6.7 percent in 2002. This was mainly a result of the company’s strategy of tightening its underwriting controls and focusing on profit rather than market share.”

Ming An was the third-largest nonlife insurance company in Hong Kong in terms of gross premiums as of the end of 2003. S&P pointed out that its “underwriting performance has improved significantly over the past two years as a result of tightened underwriting controls, while management strategy has become increasingly focused on profitability rather than market share.

“The company’s investment profile remains below average, with property investments accounting for a relatively high 30% of its total invested assets. It also has relatively high exposure to equity investments, which in 2003 accounted for 17.4 percent of its invested assets. However, the company retains a relatively large portfolio of liquid investments in cash and deposits.”

The report also concluded that “Ming An’s financial profile has improved over the past two years, mainly as a result of better capitalization following a reduction in premiums retained and an increase in shareholders’ funds following a reduction in accumulated losses.”

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