Hong Kong’s CMB Wing Lung Insurance has ratings affirmed amid strategic shifts

AM Best affirms 'Excellent' ratings, following 2022 insurance portfolio acquisition and 2023 capital injection.


Hong kongs cmb wing lung insurance has ratings affirmed amid strategic shifts
Hong kongs cmb wing lung insurance has ratings affirmed amid strategic shifts
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Hong kongs cmb wing lung insurance has ratings affirmed amid strategic shifts

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(Re)in Summary

• AM Best affirms CMB Wing Lung Insurance’s (CMBWLI) IFS at ‘A’ (Excellent) and ICR at ‘a’ (Excellent), with a stable outlook.
• CMBWLI, a non-life insurer based in Hong Kong, focuses on employees’ compensation, motor, and property lines of business.
• On 30 Dec 2022, CMBWLI acquired China Merchants Insurance’s (CMI) general insurance operations, expanding its portfolio, especially in marine insurance.
• China Merchants Insurance Holdings injected HKD 1.17bn (US$150m) into CMBWLI on 28 June 2023.

AM Best has affirmed CMB Wing Lung Insurance’s (CMBWLI) Financial Strength Rating of ”A’ (Excellent) and the Long-Term Issuer Credit Rating of ‘a’ (Excellent), with a stable outlook for both ratings.

Company overview

CMBWLI is a non-life insurer based in Hong Kong, which has a significant presence in the employees’ compensation (EC) segment. The majority of its premiums are derived from the EC, motor, and property lines of business.

On 30 December 2022, CMBWLI acquired the general insurance operations of China Merchants Insurance (CMI). This deal involved CMBWLI issuing new shares of its own company to take over CMI’s insurance business, including assets and liabilities. As a result of the deal, the company’s portfolio further expanded, with a strengthened presence in the marine insurance segment

On 28 June 2023, China Merchants Insurance Holdings (CMIH) injected an additional HKD $1.17bn (US$150m) into CMBWLI.

Following these transactions, CMIH emerged as the primary owner of CMBWLI, holding a 55% stake in the company’s expanded share capital. The rest of the shares, making up 45%, are indirectly owned by China Merchants Bank (CMB).

Ratings drivers

CMBWLI’s annualised returns on equity stood at 8% and 9% for 2022 and 2023, respectively, AM Best said.

This performance is attributed to growth in premium volume and profitable underwriting results. The company’s investment strategy, focusing on interest and dividend incomes, has also contributed to its financial stability.

The insurer’s balance sheet strength is supported by robust risk-adjusted capitalisation, as indicated by Best’s Capital Adequacy Ratio (BCAR). Post the capital injection in 2023, CMBWLI’s total capital and surplus saw an 88% increase, reaching HK$2.95bn.

Cash and cash equivalents have been the company’s largest asset type, with a strategic emphasis on enhancing the credit quality of its bond investments and de-risking its equity portfolio, AM Best said.

CMBWLI has made significant strides in risk management, incorporating investment risk controls, risk identification, monitoring tools, and governance improvements. The company is expected to benefit from additional risk management resources and oversight from its ultimate parent, China Merchants Group Limited (CMG), a state-owned enterprise.

This affirmation from AM Best underscores CMBWLI’s financial resilience and operational efficiency, positioning it well for sustained success in Hong Kong’s competitive insurance market.

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