AM Best Affirms Credit Ratings of Dah Sing Insurance Company (1976) Limited

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Dah Sing Insurance Company (1976) Limited (DSI) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect DSI’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The ratings also reflect the parental support from Dah Sing Financial Holdings Limited (DSFH) in terms of capital, brand recognition, business development, product distribution, risk management and operations.

In tandem with strengthened capital and surplus following a large capital injection of HKD 1.35 billion (USD 173 million) from DSFH in 2017, DSI has increased its exposure to investment risk materially over the past two years. As of year-end 2018, equity investments accounted for approximately half of the company’s investment portfolio. Although the company has adopted an active and dynamic hedging strategy, potential volatility in the capital markets may pose additional uncertainty to its capital and earnings. Notwithstanding, other supportive factors to the balance sheet strength include low underwriting leverage, organic capital growth from full profit retention and strong liquidity. AM Best expects the company’s risk-adjusted capitalization to remain robust over the short to intermediate term and supportive of the increase in asset and underwriting risks from business expansion.

DSI has delivered profitable operating performance over the past five years, mainly supported by its favorable and relatively stable investment results, which partially offset the more volatile underwriting experience.

As a small- to medium-sized player in Hong Kong’s non-life insurance segment, DSI achieved gross premium written of HKD 428.5 million (USD 54.7 million) in 2018. The company continues to diversify its underwriting portfolio through a multi-channel distribution network. Inward reinsurance business significantly boosted premium income for the property line in 2018, while the company also targets expansion of its accident and health line over the next few years.

Offsetting rating factors include the highly competitive operating environment, as well as additional pressure on the company’s underwriting margin due to its increasing acquisition and management expenses relative to its small net premium scale.

While positive rating actions are not likely over the short to intermediate term, negative rating actions could occur if there is a material deterioration in the company’s risk-adjusted capitalization or absolute size of capital and surplus, or a sustained unfavorable trend in operating performance, or if DSFH reduces the level of support it provides to DSI.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency and information provider with an exclusive focus on the insurance industry. Visit www.ambest.com for more information.

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