AM Best Withdraws Credit Ratings of BEA Life Limited

HONG KONG–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of BEA Life Limited (BEA Life) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn the ratings of BEA Life upon its management’s request to no longer participate in AM Best’s interactive rating process.

The ratings reflect BEA Life’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the implicit and explicit support from The Bank of East Asia, Limited (BEA) including capital, brand reputation, business development, product distribution, risk management and operational support.

BEA Life’s balance sheet strength is supported by its robust level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital base grew organically in 2019, supported by its positive operating results and full profit retention. The company’s solvency remains at a healthy level as of year-end 2019. While the company actively reduced its equity investment exposure in 2019 and held mainly cash and investment-grade bonds, the overall investment leverage continues to be high and the company’s risk-adjusted capitalisation remains sensitive to the capital market movements. Notwithstanding, AM Best expects the participating feature in BEA Life’s insurance products to offer some buffer to the company’s investment and underwriting experiences.

BEA Life’s operating performance remained positive in 2019, with five-year average return on equity and return on asset ratios of 15.9% and 1.4%, respectively. Its operating performance was underpinned by positive underwriting and investment results. Investment performance was supported by stable streams of interest income from its investment portfolio, and the company recorded realised investment gains of HKD 642 million (USD 82 million) in 2019, mainly driven by the sale of securities assets.

BEA Life remains a medium-sized company in Hong Kong’s life insurance market, which exhibits a high level of industry concentration. The company utilises its parent group’s well-established bank network and digital platforms to distribute its products, although the bancassurance channel may pose challenges to BEA Life in terms of product diversification.

On 4^th March 2020, BEA announced that it is currently conducting a comprehensive strategic review on its portfolio of businesses and assets. The bank will announce an update on the status of the review by 30^th September 2020. Based on current public information, in this rating assessment, AM Best considers there is no change in the level of parental support provided by BEA to BEA Life.

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 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, 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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Paul Lam
Financial Analyst
+852 2827 3402
paul.lam@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

James Chan
Senior Financial Analyst
+852 2827 3418
james.chan@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com