BOC Insurance Co. Ltd. #A-# Ratings Outlook Stable

Stocks and Financial Services Press Releases Thursday January 11, 2018 18:02
HONG KONG--11 Jan--S&P Global Ratings

HONG KONG (S&P Global Ratings) Jan. 11, 2018--S&P Global Ratings affirmed its 'A-' local currency long-term insurer financial strength and issuer credit ratings on BOC Insurance Co. Ltd. The outlook is stable.

We affirmed the ratings because we expect the improvement in the capitalization of BOC Insurance following the divestment of its life insurance business to offset the deterioration in the insurer's risk position. We now view BOC Insurance as a strategically important subsidiary of Bank of China (BOC) group. BOC Insurance transferred its 51% shareholding in BOC-Samsung Life Insurance Co. Ltd. to BOC Investment Asset Management Co. Ltd., an investment arm of the group in November 2017.

We view BOC Insurance's property and casualty (P&C) insurance business as less aligned with the Bank of China (BOC) group's strategy compared to the provision of life insurance and wealth management products through the bancassurance channel. As a result, we have revised our assessment of BOC Insurance's group status to strategically important from highly strategically important. BOC-Samsung Life accounted for more than 40% of BOC Insurance's consolidated total premium and more than half of consolidated total assets prior to the separation.

We expect BOC Insurance to maintain its improved capitalization over the next two years. This is because BOC-Samsung Life's capital adequacy is weaker than that of BOC Insurance due to the life insurer's fast growth and more aggressive investment strategy. BOC Insurance and BOC-Samsung Life's regulatory comprehensive solvency ratios were 291% and 154%, respectively, as of Sept. 30, 2017, above the regulatory minimum of 100%.

We expect BOC Insurance to gradually increase its allocation to risky assets to boost investment income. The insurer's investments in equity (in stock and fund investment) and in insurance asset management products have increased to 28.6% and 18.9% of total investments in 2016, from 23.0% and 14.1% in 2015.

We believe BOC Insurance will continue to report underwriting losses in line with our expectation. The insurer reported large losses in 2017, mainly due to its guarantee business, which we view as volatile with losses susceptible to economic conditions. The company has since downsized its guarantee business, with its share in total premiums falling to about 3% as of Sept. 30, 2017, from 19.5% in 2013. BOC Insurance's combined ratio was 104.2% in 2016. A combined ratio of less than 100% indicates underwriting profits.

The stable outlook on BOC Insurance reflects our expectation that the insurer will maintain its strategic importance in BOC group over the next two years. The stable outlook also reflects our view that BOC Insurance will continue to benefit from the group's distribution channels and client referrals, and maintain its current level of capitalization over the next two years.

We could lower the ratings on BOC Insurance if we downgrade BOC. We may also downgrade BOC Insurance if the insurer's capitalization deteriorates substantially over the next two years. We may upgrade BOC Insurance if we raise the ratings on BOC.


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