AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Macau Insurance Company Limited (MIC) (Macau). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect MIC’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.

MIC’s risk-adjusted capitalisation remained at the strongest level at year-end 2023, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus increased by 3.5% to MOP 998 million in 2023, mainly reflecting capital gains from equity investments. Although MIC’s strategic asset allocation reflects its appetite to equity investments, market risks are mitigated partially by the company’s surplus capital, diversified equity portfolio, and hedging strategy.

MIC has paid MOP 309 million in special dividend to the ultimate parent, Dah Sing Financial Holdings Limited, according to its capital plan. The dividend repatriation was executed in two stages – June 2023 and June 2024. Since the majority of the special dividend was settled by the transfer of equity investments, which lowered the equity securities risk, as measured by Best’s Capital Adequacy Ratio (BCAR), AM Best does not see a significant weakening in risk-adjusted capitalization. MIC has applied a 25% dividend payout ratio based on profit after tax starting from 2023 and is expected to maintain this dividend payout policy in the near future. Based on MIC’s business plan, AM Best expects the company’s risk-adjusted capitalisation will remain solid to manage its underwriting and investment risks.

MIC’s underwriting and investment income results have been consistently positive over the past years. Its combined ratio improved to 88.8% in 2023, with favourable investment gains mainly due to the changes in fair value of equity investments. AM Best expects MIC to maintain underwriting profitability through expanding its more profitable business with higher premium retention.

MIC was ranked third in Macau’s non-life insurance market for over a decade but fell to the fourth spot in 2023. The gradual decline in its market share over the past few years was driven partially by external factors, including COVID impacting the gaming and tourism industry and contraction of casino investments, from which a meaningful proportion of MIC’s business is derived. The company attained a market share of 9.0% (MOP 255 million) in terms of gross premiums written (GPW) in 2023. MIC has forecast its GPW for 2024 to have organic growth with casino development making strong contributions, while the recovery in the gaming and tourism industry gradually spills over to other parts of the economy. Going forward, MIC aims to capture growth opportunities in both commercial and personal lines, for example, motor vehicles going into mainland China from Macau and the Greater Bay Area. The company also embraces digitalisation to enhance its service level, data accuracy and process efficiency to support future business expansion.

Negative rating actions could arise if MIC’s business profile exhibits a sustained diminishing trend that materially deviates from its indicated plans. Negative rating actions also could occur if there is a significant decline in MIC’s absolute amount of capital due to material investment losses or larger-than-expected dividend payouts. Positive rating actions could occur if MIC demonstrates successful implementation of its business plan to achieve sustained improvement and stability in its operating performance, while maintaining a robust level of risk-adjusted capitalisation.

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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