HONG KONG –(BUSINESS WIRE) —#Insurance—Best in the morning Affirmed that Blue Cross (Asia Pacific) Insurance Company Limited (Blue Cross or the Company) (Hong Kong) has a financial strength rating of A (Excellent) and a long-term issuer credit rating of “a+” (Excellent). The outlook on these credit ratings is stable.
The rating reflects Blue Cross’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. It also incorporates the rating upgrade Blue Cross received from its ultimate parent, AIA Group Ltd. (AIA).
At the end of 2022, Blue Cross’ risk-adjusted capital remained at its highest level, as measured by Best’s capital adequacy ratio (BCAR). As a result of net losses and negative fair value reserve changes and the transfer of its remaining long-term operations to AIA Everest Life Insurance Company Limited. Blue Cross’ balance sheet strength is driven by AIA’s capital support, prudent investment strategy, strong liquidity, low reinsurance dependence and a debt-free balance sheet. AM Best expects Blue Cross’s risk-adjusted capital to continue to support a very strong balance sheet strength assessment in the short to medium term.
Blue Cross’s 2022 operating results were negatively impacted by a significant one-time loss from discontinued operations and unfavorable investment results. Going forward, the company plans to expand its premium income at an above-average double-digit growth rate in the short to medium term.
Still, AM Best expects the company’s earnings to remain minimal in 2022 and 2023 as the integration with AIA leads to higher operating expense levels. In contrast, the company continues to generate profitable and stable investment income from its fixed income-oriented portfolio. Overall, AM Best believes that Blue Cross’ operating performance is commensurate with its adequate assessment.
The majority of Blue Cross’s coverage portfolio consists of individual and group health plans. The company is the sixth-largest provider of accident and health products in terms of direct written premiums in 2022. The company distributes its products through a multi-channel strategy, including direct sales, a fleet of AIA agents, a bancassurance partnership with Oriental Bank Asia Limited and external producers such as agents and brokers.
With its established franchises, particularly in health insurance, Blue Cross is expected to play a strategic role in AIA’s comprehensive health strategy. The company continues to benefit from explicit and implicit support from AIA. In addition to providing capital support, AIA’s expertise and experience in the insurance industry can provide Blue Cross with best practices, talent and technology to improve its operations. AIA’s strong agency force and established network of distribution partners can also help Blue Cross expand its customer base and market reach.
Negative rating action could occur if Blue Cross’s risk-adjusted capital deteriorates significantly or if the company experiences sustained deterioration in operating results due to adverse deviations from its business plan. Negative rating action could also result if AIA’s credit profile deteriorates, or if the level of support from Blue Cross decreases, or if Blue Cross becomes less strategically important and integrated with AIA. Positive rating action could be taken if Blue Cross can demonstrate sustained above-average operating performance.
Ratings are communicated to the rating entity prior to issuance.Ratings unless otherwise stated No changes have been made since this notification.
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