A.M. Best Revises Issuer Credit Rating Outlook to Positive for China Overseas Insurance Limited

A.M. Best has revised the outlook to positive from stable for the issuer credit rating (ICR) of China Overseas Insurance Limited (COIL) (Hong Kong). Concurrently, A.M. Best has affirmed the financial strength rating (FSR) of B++ (Good) and the ICR of “bbb” for COIL. The outlook for the FSR remains stable.

The positive outlook reflects COIL’s strengthened capitalization, improved underwriting results and its solid market profile in the construction employees’ compensation (EC) market in Hong Kong.

COIL derives most of its business from its parent, China State Construction International Holdings Limited (CSCIH), which is one of the largest construction companies in Hong Kong. The stable revenue stream from CSCIH has enabled COIL to become one of the key players in the construction EC market in Hong Kong. In 2013, CSCIH injected HKD 150 million into COIL to strengthen its capitalization level to support the strong business growth. COIL’s underwriting results have been on an improving trend in the past five years, with combined ratios better than the industry average in 2012 and 2013.

Offsetting factors include potential volatility in its underwriting results stemming from the long-tail nature of the construction EC business, and the investment portfolio’s relatively high concentration in the property sector.

Future positive rating actions could occur if COIL can continue its favorable underwriting performance while maintaining solid risk-adjusted capitalization. Factors that could lead to downward rating actions include a material deterioration in its underwriting performance, and/or a substantial decline in its risk-adjusted capitalization level.

The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Catastrophe Analysis in A.M. Best Ratings
• Evaluating Non-Insurance Ultimate Parents
• Risk Management and the Rating Process for Insurance Companies
• Understanding Universal BCAR

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

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.

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