AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of 'a-' (Excellent) of
The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect HLIA's balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
HLIA's balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). The assessment also reflects HLIA's low underwriting leverage and a reinsurance programme of good quality. Offsetting factors include the company's modest capital size, some concentration risk in a real estate and moderate reinsurance dependency.
HLIA's strong operating performance is evidenced by positive underwriting results, with a five-year average net combined ratio of approximately 80% and a five-year average return on equity of 8.7%. The underwriting profitability was affected negatively by the COVID-19 pandemic due to less travel business, but the net combined ratio still outperformed the market. Acquisition expenses may increase in the future as the company expands its distribution channels, diluting the proportion of direct channel, but the company expects its overall underwriting profit to increase as the insurance portfolio grows. The company's unrealized losses from investments reduced the overall net profit in recent years.
HLIA maintains a small market presence in
The company's risk profile shows moderate business concentration risk given that it is a local insurer in a small market and has some asset concentration. Nevertheless, AM Best considers the company's risk management capabilities to be aligned appropriately with its risk profile, supported mainly by the company's prudent underwriting guidelines and robust reinsurance programme.
Negative rating actions could occur if there is significant deterioration in HLIA's operating performance; for example, due to adverse investment losses or a diminished underwriting margin. Negative rating actions also could occur if there is significant deterioration in the company's risk-adjusted capitalisation. A deterioration in the credit profile of HLIA's parent companies,
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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