News Asia10 Jun 2024

bolttech HK's insurance service results surge on lower expenses

| 10 Jun 2024

Hong Kong-based insurer bolttech Insurance saw its insurance service result increase to HK$54m in 2023, from HK$29m a year ago, on a fall in insurance service expenses. The favourable underwriting performance was partly attributed by the release of reserves, says Fitch Ratings.

The insurer's average return on equity was 5% in 2022-2023 under the IFRS 17 accounting standard, which is commensurate with the guideline for Insurer Financial Strength (IFS) 'BBB' category rated insurers. Its profitability in 2022 was predominantly influenced by substantial IT investment. The insurer expects the significant amount of the IT expenses to end by end-1H2024.

Fitch has affirmed bolttech Insurance’s IFS Rating at 'BBB+' (Good). The outlook is ‘Stable’.

The rating affirmation reflects bolttech Insurance's 'Good' financial performance, 'Moderate' company profile, strong capital adequacy and reliance on reinsurance.

Aside from good financial performance, major factors driving bolttech Insurance’s ratings include: 

Stable Company Profile: Fitch ranks bolttech Insurance's company profile as 'Moderate' compared with all other Hong Kong insurers. bolttech Insurance has an adequate business franchise within Hong Kong's non-life insurance sector despite its small operating scale, which represented 1.3% market share by gross premiums in 2023. Its major business lines are accident and health, property damage and general liability. The corporate governance ranking is 'Neutral'.

Strong Capital Adequacy: Fitch’s 'Strong' assessment of bolttech Insurance's capitalisation reflects a Fitch Prism Model score that was in the 'Extremely Strong' category at end-2023, driven by its low investment risk and stable business growth. bolttech Insurance's local solvency ratio was 509% at end-2023, well above the regulatory preferred level of 200%.

Reliance on Reinsurance: bolttech Insurance uses reinsurance to enhance underwriting capacity and mitigate potential risk. The company is exposed to credit risk associated with one of the reinsurers, which has no international credit rating. However, the associated ceded recoverable amount is less than 7% of total net assets, based on the issuer's internal risk guideline, which is more stringent than the regulatory requirement of 10%. The issuer has a credit facility issued by a bank with strong credit rating, which is more than adequate to cover the potential losses arising from the reinsurance arrangement, leading to a negative net exposure with the overcollateralisation.

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