HONG KONG--(BUSINESS WIRE)--AM Best has removed from under review with positive implications and upgraded the Long-Term Issuer Credit Rating to �a+� (Excellent) from �a� (Excellent) and affirmed the Financial Strength Rating of A (Excellent) of Blue Cross (Asia-Pacific) Insurance Limited (Blue Cross) (Hong Kong). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings of Blue Cross were placed under review with positive implications in August 2022, following the announcement that the incumbent immediate parent, AIA Holdings (Hong Kong) Limited, a wholly owned subsidiary of AIA Group Limited (AIA), had completed the transaction to acquire 100% of shares in Blue Cross from The Bank of East Asia, Limited (BEA). AIA is a leading pan-Asian life insurance company headquartered in Hong Kong that operates in 18 markets across the Asia-Pacific region and offers a wide range of insurance products and services.

The ratings reflect Blue Cross� balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. It also incorporates the rating enhancement that Blue Cross receives from AIA.

Blue Cross� balance sheet strength is assessed at the very strong level, underpinned by the strongest level of risk-adjusted capitalisation, as measured by Best�s Capital Adequacy Ratio (BCAR). While the company�s capital and surplus saw a material decline in 2022 due to a net loss and negative fair value changes in investments, AM Best expects the company to benefit from capital support from AIA to underpin a faster-than-average business expansion over the short to intermediate term, according to its business plan. Other supportive factors to the balance sheet strength include a prudent investment strategy, strong liquidity, low reinsurance dependency and a debt-free balance sheet.

Blue Cross reported a 71.5% decline in net profit in 2021 due to a higher loss ratio, mainly attributed to a low base effect from deferred medical treatments amid the COVID-19 pandemic in 2020. Total earnings turned negative in 2022 as net investment loss on its run-off life portfolio hampered the overall performance. On 1 November 2022, this residual life portfolio was fully transferred to AIA Everest Life Company Limited. Going forward, according to its business plan, the company projects to deliver marginal operating profitability and negative return on equity in 2022 and 2023, driven by significant investments and expenses as it integrates with AIA. In contrast , the company continues to source profitable and stable investment income from its fixed-income oriented investment portfolio. Overall, AM Best considers Blue Cross' operating performance commensurate with the adequate assessment.

Blue Cross maintains a solid market presence in the Hong Kong general insurance market, with a primary focus on medical insurance that accounted for 85% of its net premium written in 2022 and was the sixth-largest provider of accident and health (A&H) products in terms of direct premium written. The company utilises a multichannel distribution strategy, including direct sales, a bancassurance partnership with BEA and external producers, such as agents and brokers.

Leveraging its established franchise in the A&H line a relatively young customer base, Blue Cross is expected to play a strategic role in the group�s strategy by broadening the group�s product offering to non-life products. Blue Cross can benefit in several ways from its parent company's financial strength and stability, such as access to capital and liquidity support. Additionally, AIA's expertise and experience in the insurance industry can provide Blue Cross with access to best practices, talents and technologies to improve its operations. AIA's strong agency force and established network of distribution partners can enable Blue Cross to expand its customer base and market reach.

The company is well-positioned at the current rating level. Negative rating actions could occur if there is significant deterioration in Blue Cross� risk-adjusted capitalisation or operating performance, due to sustained deterioration in earnings from adverse deviations in the business plan that erode the capital position. Negative rating actions also may result if the credit profile of AIA weakens, or from a reduced level of support from either or a reduction in Blue Cross� strategic importance and integration to AIA.

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 Guide to Best�s Credit Ratings. For information on the proper use of Best�s Credit Ratings, Best�s Performance Assessments, Best�s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best�s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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