A.M. Best Affirms Ratings of Luen Fung Hang Insurance Company Limited

OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) and the issuer credit rating of "a-" of Luen Fung Hang
Insurance Company Limited (LFH) (Macau). The outlook for both ratings
is stable

The ratings reflect LFH's profitable underwriting results, strong
risk-based capitalization and solid business profile in the local
market. The ratings also acknowledge the company's bancassurance
capabilities.

Supported by its major bank shareholders, LFH distributes products
through the branch network of its shareholders in Macau. The
bancassurance strategy has allowed LFH to maintain its competitive
edge in acquiring new business and servicing its existing customers.
With a market share of 15% in terms of gross premiums written (GPW),
the company was the third-largest insurer in Macau's general insurance
market in 2007.

The company's underwriting results remained favorable in 2007. The
combined ratio was 91.1% for the year, albeit an increase in loss
ratio to 43.8% from 41.8% in 2006. This was due mainly to the
unfavorable claims experience of motor and employees' compensation
lines. A.M. Best expects LFH will be able to sustain the sound
underwriting results with a stable combined ratio in 2008.

LFH's risk-adjusted capitalization, as measured by Best's Capital
Adequacy Ratio (BCAR), remained at a level that supports its risks
underwritten in 2007. Net premium leverage was 79% for the year. Given
the existing earning retention practice, A.M. Best anticipates that
LFH's risk-adjusted capitalization will gradually improve in the
medium term. The average dividend payout ratio stood at 24.7% over the
past five years.

Offsetting factors include strong market competition and
deteriorating claim experience in Macau's general insurance market.

Intense competition and persistent softening market conditions in
recent years have led to the deterioration in the underwriting margin
for the entire industry.

Claim experience in the non-life insurance market, particularly
for the motor business, has been declining. In line with the market,
LFH's loss ratio rose to 44% in 2007 from 32% in 2003. A.M. Best
expects the changing market conditions to continue to challenge the
company's future underwriting performance.

Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals
and health care system providers. For more information, visit
www.ambest.com.

A.M. Best Co.
Analysts:
Fion Li, +852-2827-3411
fion.li@ambest.com
or
Terrence Wong, +852-2827-3403
terrence.wong@ambest.com
or
Public Relations:
Jim Peavy, +(1) 908 439 2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com

Copyright Business Wire 2008