S&P Raises Ratings on Ming An

December 28, 2005

Standard & Poor’s Ratings Services announced that it has raised its long-term insurer financial strength rating on Hong Kong’s Ming An Insurance Co. to “BB+” from “BB”, “reflecting an improvement in the company’s operating performance and financial profile.” The rating outlook is positive.

“The ratings reflect implicit support from the company’s parent group, China Insurance (Holdings) Co. Ltd., but are offset by high asset concentration risks,” said S&P. “Ming An’s financial profile has improved in recent years, mainly due to better capitalization thanks to improved profitability,” stated S&P credit analyst Connie Wong.

S&P said, however that this “is overshadowed by high levels of recoverable single-entity reinsurance debts, which currently stand at about Hong Kong dollar 800 million [U.S. $103 million]. The full amount of reinsurance recoverable is scheduled for repayment to the company before the end of 2009.

“Ming An’s underwriting performance has improved significantly over the past two years as a result of tighter underwriting. The company’s combined ratio improved to a good 91.8 percent at the end of September 2005 from 95.8 percent nine months earlier.

“Management strategy has become increasingly focused on profitability rather than market share. The company’s management team has been strengthened over the past few years by streamlining and recruitment.

“Ming An’s investment profile is highly concentrated, with property accounting for 33 percent of its total invested assets. The company also has relatively high exposure to equity, which accounted for about 16 percent of its invested assets at the end of September 2005. However, this relatively high exposure is offset by a large portfolio of cash and good quality bonds. Ming An’s financial profile is expected to improve over the medium term thanks to its satisfactory and improving operating performance.”

S&P concluded that “any positive rating action will depend on the amount and timing of the payment of the company’s recoverable reinsurance and a continued good operating performance. The outlook may be revised to stable if the company’s operating performance deteriorates or it fails to recover its reinsurance debts due.”

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