(The following statement was released by the rating agency)
HONG KONG, September 05 (Fitch) Fitch Ratings has affirmed Hong
Life Insurance Company (Bermuda) Limited's (FWD Life HK) Insurer
Strength (IFS) rating at 'A'. The Outlook is Stable.
KEY RATING DRIVERS
The rating affirmation reflects FWD Life HK's solid solvency
growth in value of in-force business, sound distribution
capability and proper
asset liability management. Key rating constraints include its
position and keen competition from bank-owned insurers and
insurers with extensive distribution networks.
FWD Life HK is prudent in managing its solvency adequacy. It
will not pay
dividends if the local solvency ratio drops below 250%. The
ratio was 241% as at end-1H14 (end-2013: 241%), well above the
preferred benchmark. Fitch believes FWD Life HK has adequate
capital buffers to
facilitate its ongoing new business growth and deal with asset
FWD Life HK's exposure to risky assets, such as equities,
Equities exposure accounted for about 6.9% of its invested
assets as at end-1H14
(end-2013: 6.7%). About 82% of its invested assets were in good
bonds at end-1H14. Additionally, FWD Life's asset liability
are sound, with the duration gap between assets and liabilities
reducing to less than two years in 1H14.
FWD Life HK recorded an improvement in the margin of its new
business value in
1H14 despite a decline in new business sales from the
bancassurance channel. A
change in product focus from policies with thin margins, such as
endowments, to higher-margin protection-type products led to a
premiums written from its banking partners. Nonetheless,
business growth from
its agency force remained strong in 1H14.
While FWD Life HK continued to register strong growth in value
business, the company's market share of new business in terms of
premium equivalents declined to about 2.4% in 1H14 from 3.1% in
company plans to accelerate its growth by strengthening the
productivity of its agency force in 2H14. However, the agency
with strong distribution coverage will continue to challenge FWD
ambitions for growth.
Downgrade triggers include a decline in FWD Life HK's local
solvency ratio to
lower than 225% on a prolonged basis, significant deterioration
in lapse rates,
and a material reduction in mortality profits. The rating could
affected if there is a considerable change in its asset
An upgrade for FWD Life HK is unlikely in the near term.
However, over the
medium term, the rating could be upgraded if the company manages
to widen its
market coverage and further improve its financial fundamentals
in terms of new
business margin and growth of value of in-force business.
FWD Life HK has an operating history of about three decades in
Businessman Richard Li, who controls Pacific Century Group,
acquired ING Groep's
insurance operations in Hong Kong, Macau and Thailand in
February 2013. In
October 2013, Swiss Re Group became a strategic partner to FWD
holding entity of FWD Life HK, by acquiring a 12.3% stake.
+852 2263 9920
Fitch (Hong Kong) Limited
2801, Tower Two, Lippo Centre
89 Queensway, Hong Kong
+852 2263 9595
+852 2263 9939
Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935,
Additional information is available at www.fitchratings.com.
Applicable criteria, "Insurance Rating Methodology", dated 4
September 2014, are
available on www.fitchratings.com.
Applicable Criteria and Related Research:
Insurance Rating Methodology
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