HONG KONG – (COMMERCIAL THREAD) –AM Best confirmed the financial strength rating of A- (excellent) and the long-term issuer credit rating of âa-â (excellent) of Dah Sing Insurance Company (1976) Limited (DSI) (Hong Kong). The outlook for these credit ratings (ratings) is stable.
The ratings reflect the strength of DSI’s balance sheet, which AM Best considers to be very strong, as well as its adequate operational performance, limited business profile and appropriate management of business risks.
The ratings also reflect the parental support of Dah Sing Financial Holdings Limited (DSFH) in terms of capital, brand recognition, business development, product distribution, risk management and operations.
The company‘s risk-adjusted capitalization remains at the highest level, as measured by Best’s capital adequacy ratio (BCAR), and supports the increased asset and underwriting risks resulting from its expansion commercial. Following a major capital injection from DSFH in 2017, DSI has significantly expanded its investment portfolio over the past four years. The increased investment risk is partially mitigated by the different control limits stipulated in DSI’s investment policy and the diversity of its equity portfolio. Other factors supporting balance sheet strength include organic capital growth through full earnings retention.
DSI has consistently achieved profitable operational performance over the past five years (2016-2020), primarily driven by its favorable investment results, although partially offset by the relatively marginal and volatile underwriting performance.
As a small to mid-sized player in the non-life insurance segment in Hong Kong, DSI maintained a market share of around 1%, with a gross written premium of HKD 551.6 million in 2020. The three main sectors of activity of the company are automotive. , employee compensation and property entry treaty lines. DSI plans to reduce the proportion of its reinsurance inbound treaty business in order to better control its risk accumulation, while further strengthening and diversifying its multi-channel distribution network through new business initiatives in growing business sectors, including property damage, engineering, mortgages and medium-sized businesses. –market focused on small and medium-sized enterprises.
Compensating rating factors include its high proportion of equity investments, which can generate volatility for the company’s capital and earnings. Other factors include additional pressure on the Company’s underwriting margin due to possible adverse claims experience related to the inbound automotive and real estate treaty business.
Negative rating actions could occur if there is a significant deterioration in the company’s risk-adjusted capitalization or absolute capital and surplus size, or a sustained unfavorable trend in operating performance. Negative rating actions are also possible if DSFH’s credit profile deteriorates significantly, or if DSFH reduces the level of support it provides to DSI.
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