A.M. Best Downgrades Ratings of Wing Lung Insurance Company Limited

OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has downgraded the financial strength rating to B++ (Good) from A-
(Excellent) and the issuer credit rating to "bbb+" from "a-" of Wing Lung
Insurance Company Limited (WLI) (Hong Kong). The outlook for both ratings is
stable.

The ratings reflect the company`s solid business profile and liquid investment
portfolio.

WLI has established a stable market presence in the Hong Kong general insurance
market. In 2007, the company was ranked ninth in the local market with a market
share of 2.7% by gross premiums written. WLI remained the second largest
participant in the general liability market, representing approximately 8% of
market share.

WLI maintained a liquid investment position by holding approximately 77.2% of
total invested assets in cash and fixed income securities as of September 2008.
Going forward, it is expected that WLI will further increase its holdings in
cash, which will play a key role in stabilizing its operating profitability.

Offsetting factors include the significant reduction in WLI`s capitalization due
to the high investment losses and further deterioration in its underwriting
performance as a result of the poor performance from unprofitable employee
compensation (EC) business and the requirement to strengthen its claim reserves.

Over the past five years, poor claims experience from the EC business has
continued to weaken WLI`s underwriting margin, leading to approximately a 5.6%
increase in the overall combined ratio to 95.1% in 2007 from 89.5% in 2003. In
addition, further deterioration in the underwriting result of the motor business
resulted in the combined ratio reaching 125% for the first nine months of 2008.
Looking ahead, A.M. Best believes that WLI`s underwriting profitability will be
subject to the movement of premium rates and the claims experience of the motor
and EC businesses.

WLI suffered high investment losses from both its bond and equity investments
during 2008. Write-offs from the credit-linked instruments and the capital
losses from other equity investments significantly dragged down the company`s
net investment income to negative HKD 57 million (negative USD 7 million) as of
September 2008 from the positive investment earnings of HKD 95 million (USD 12
million) in the prior period.

Operating deficits resulting from the investment losses, a higher level of
reserving and a poor underwriting margin from EC in 2008 greatly undermined
WLI`s capitalization on a risk-adjusted basis as measured by Best`s Capital
Adequacy Ratio. The company`s capital and surplus plunged by 34% to HKD 506
million (USD 65 million) as of September 2008. Although WLI has lowered its
asset risk through asset reallocation, A.M. Best will cautiously monitor the
company`s risk-based capitalization going forward in order to support its risks
underwritten.

For Best`s Ratings, an overview of the rating process and rating methodologies,
please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any
additional methodologies and factors, which may have been considered, can be
found at www.ambest.com/ratings/methodology.

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

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