AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Starr Property & Casualty Insurance (China) Company, Limited (Starr China) (China). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Starr China’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 company’s high level of integration with the wider Starr group and the support it receives in various areas including capital management, underwriting expertise, inward business, reinsurance and risk oversight.
AM Best expects the company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain at a robust level over the short to intermediate term, supported by its conservative investment strategy and continued accumulation of earnings through full profit retention. The capital buffer should remain supportive as its business expands and its risk profile widens.
AM Best has revised its assessment of the company’s operating performance to adequate from marginal, as the company demonstrated a successful implementation of its turnaround strategy in building a non-auto portfolio and reported an improving trend in its underwriting profit over the past five years. Combined with a stable stream of interest income from deposits and fixed income investments, which contributed to mitigating volatility in its underwriting, the company’s return on equity, excluding non-recurring gains, has ranged in the mid-single digits since 2014.
Offsetting rating factors include the company’s limited market position amid the broadly soft and highly competitive Chinese non-life insurance market; exposure to volatility in claims experience arising from business expansion in casualty and financial lines; challenges in product innovation; and the strengthening of its distribution network in the accident and health market.
Positive rating actions are unlikely over the short to intermediate term. Negative rating actions could occur if there is a material deterioration in Starr China’s operating results, a significant decline in its risk-adjusted capitalization due to a faster-than-expected increase in its risk profile or a reduced level of support from its parent, Starr group.