(The following statement was released by the rating agency)
Jan 22 -
===============================================================================
Summary analysis -- Falcon Insurance Co. (Hong Kong) Ltd. --------- 22-Jan-2013
===============================================================================
CREDIT RATING: None. Please see issue list. Country: Hong Kong
Primary SIC: Fire, marine, and
casualty
insurance
===============================================================================
Financial Strength Rating History:
29-Apr-2002 A-
===============================================================================
Rationale
The rating on Falcon Insurance Co. (Hong Kong) Ltd. (Falcon HK) reflects
explicit support provided in the form of a guarantee by Odyssey Reinsurance
Co. (Odyssey Re; local currency A-/Positive/--), a subsidiary of Falcon HK's
ultimate parent, Fairfax Financial Holdings Ltd. (BBB-/Positive/--).
Falcon HK's stand-alone credit profile is still weak, even though it has
improved over the past year. The stand-alone credit profile reflects the
company's marginal market position in Hong Kong's general insurance market,
its less favorable capitalization, and high equity investments. Offsetting
factors are the company's satisfactory operating performance, which has
improved over the past year, and its adequate liquidity.
We attribute Falcon HK's significant growth in terms of gross premiums in the
past two years to a revision in strategy. Since 2009, the company has
realigned its strategy to target mainly marine hull, regional property, and
other commercial lines, with help from regional group companies in terms of
knowledge sharing. However, we expect Falcon HK's top-line growth to slow over
the next two years to reflect the company's realigned strategy. Falcon HK
receives significant inward reinsurance business from Singapore-based First
Capital Insurance Ltd. We consider this business to be profitable although it
carries significant risk. Nevertheless, Falcon HK still needs time to prove
that its strategy has been successful in Hong Kong. The company still has a
marginal business position in the competitive Hong Kong general insurance
market. It had a market share of 2% in terms of gross premiums in 2011. Falcon
HK continues to operate its Hong Kong personal and commercial business through
its agency force and broker network.
Falcon HK's product mix changed slightly in line with the new business
strategy. The largest contributor to the gross premiums written was the motor
business (23.9%), while the contribution from the marine business reduced
(23.2%) because the company focused less on unprofitable segments within the
marine lines business. The rest of Falcon HK's portfolio includes employees'
compensation (24%), property damage (12.1%), and others (16.8%) segments.
We expect Falcon HK's underwriting performance to continue to improve over the
next 18 months due to tightened underwriting control in its HK business and
higher premiums in the compulsory liabilities business. The combined ratio
fell to 99.2% in 2011 from 113.7% in 2010. This was primarily due to an
improved loss ratio of 69.9% in 2011 (80.8% in 2010) as a result of the
company's new strategy.
We consider Falcon HK's investment profile as satisfactory, but its equity
investment exposure remains significant. At the end of 2011, 25.9% of its
assets were invested in stocks and mutual funds. The rest included
fixed-income securities (42.2%) and cash (31.8%). Falcon benefits from the
investment expertise of Hamblin Watsa Investment Counsel Ltd., a 100%-owned
subsidiary of Fairfax.
While Falcon HK's capitalization is commensurate with the stand-alone credit
profile, based on our capital model analysis, it is weak reflecting the
company's small size and risky assets exposure. The company's ratio of
shareholders' funds to net premium income is about 108% as of the end of 2011.
Enterprise risk management
Falcon HK's enterprise risk management (ERM) framework is integrated with that
of the wider group. We assess the company's parent, Fairfax, as having
adequate ERM. Our belief that adequate risk controls are in place for the
majority of the group's risks is the primary factor supporting our overall
risk assessment. The recent formalization of the organization's ERM efforts,
combined with partially centralized risk aggregation and control, currently
limits a stronger assessment.
Outlook
The positive outlook reflects the outlook on Odyssey Re based on explicit
support in the form of a guarantee. We will upgrade Falcon HK if we raise the
rating on Fairfax's guaranteeing entity. Conversely, we will revise the
outlook on Falcon HK to stable if we revise the outlook of the guarantor to
stable.
Source: http://news.yahoo.com/text-p-summary-falcon-insurance-co-hong-kong-094911501--sector.html
invincible jesse jackson whitney houston funeral video tyler perry whitney houston r kelly r. kelly macular degeneration
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.