Friday 10 March 2023

AM Best upgrades issuer Credit Rating of Blue Cross

KUALA LUMPUR, March 10 (Bernama) -- Global credit rating agency, AM Best has removed from under review with positive implications and upgraded the Long-Term Issuer Credit Rating to “a+” (Excellent) from “a” (Excellent) and affirmed the Financial Strength Rating of A (Excellent) of Blue Cross (Asia-Pacific) Insurance Limited (Blue Cross), Hong Kong.

According to a statement, the outlook assigned to these Credit Ratings (ratings) is stable.

The ratings of Blue Cross were placed under review with positive implications in August 2022, following the announcement that the incumbent immediate parent, AIA Holdings (Hong Kong) Limited, a wholly owned subsidiary of AIA Group Limited (AIA), had completed the transaction to acquire 100 per cent of shares in Blue Cross from The Bank of East Asia, Limited (BEA).

The ratings reflect Blue Cross’ balance sheet strength, which AM Best assessed as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. It also incorporates the rating enhancement that Blue Cross receives from AIA.

Blue Cross’ balance sheet strength is assessed at the very strong level, underpinned by the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio.

While the company’s capital and surplus saw a material decline in 2022 due to a net loss and negative fair value changes in investments, AM Best expects the company to benefit from capital support from AIA to underpin a faster-than-average business expansion over the short to intermediate term, according to its business plan.

Blue Cross reported a 71.5 per cent decline in net profit in 2021 due to a higher loss ratio, mainly attributed to a low base effect from deferred medical treatments amid the COVID-19 pandemic in 2020. Total earnings turned negative in 2022 as net investment loss on its run-off life portfolio hampered the overall performance.

On Nov 1, 2022, this residual life portfolio was fully transferred to AIA Everest Life Company Limited. Going forward, according to its business plan, the company projects to deliver marginal operating profitability and negative return on equity in 2022 and 2023, driven by significant investments and expenses as it integrates with AIA.

Blue Cross maintains a solid market presence in the Hong Kong general insurance market, with a primary focus on medical insurance that accounted for 85 per cent of its net premium written in 2022 and was the sixth-largest provider of accident and health (A&H) products in terms of direct premium written.

For more information, visit www.ambest.com.

-- BERNAMA

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