A.M. Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to Dah Sing Insurance Company (1976) Limited (DSI) (Hong Kong). The outlook assigned to these Credit Ratings (ratings) is stable.
DSI is a wholly owned subsidiary of Dah Sing Financial Holdings Limited (DSFH), a financial holding company headquartered in Hong Kong and listed on the Hong Kong Stock Exchange since 1987.
Prior to 2011, DSFH operated a general insurance business in Hong Kong through Dah Sing Insurance Company Limited. In April 2011, DSFH acquired Summit Insurance Limited and renamed it Dah Sing Insurance Company (1976) Limited (DSI). In 2012, Dah Sing Insurance Company Limited completed the transferral of its business portfolio to DSI.
The ratings reflect DSI’s balance sheet strength, which A.M. 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 DSFH in terms of capital, brand recognition, business development, product distribution, risk management and operational support.
DSI received a material capital injection of HKD 1.35 billion (USD 173 million) from DSFH in 2017. The company also has grown its capital base gradually from a full retention of net profits over the past five years.
A.M. Best expects the company’s risk-adjusted capitalization to remain robust over the short to intermediate term, supporting the anticipated increase in asset and underwriting risks driven by business expansion.
The company has delivered profitable operating results over the past five years, mainly attributed to a stream of interest income from the high proportion of fixed income investments, which partially offset the higher volatility in underwriting results.
As a small-sized player with limited market share in Hong Kong’s non-life segment, DSI’s underwriting portfolio remains skewed toward motor and employees’ compensation businesses, although the company has been gradually diversifying its book of business by tightening underwriting of these products while expanding accident and health business via the affiliated Dah Sing Bank network.
Offsetting rating factors include the highly competitive operating environment and additional pressure on the company’s underwriting margin due to increasing acquisition and management expenses relative to its small 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 a sustained unfavorable trend in operating performance, or if DSFH reduces the level of support it provides to DSI.
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