BOC Life’s outlook turns sour: Moody’s

Downgrade risks include failing profitability, capital adequacy, a downgrade of BOC Hong Kong's rating, and a decline in the ability or willingness of shareholders and affiliates to provide support.

BOC Group Life Assurance outlook changed to negative, amidst the insurer’s sensitivity to a potential decline in the rating or credit quality of BOC Hong Kong, as BOC Life benefits from affiliate support, Moody’s Investors Services said.

BOC Life is 51% owned by BOC Hong Kong Limited and 49% owned by Bank of China Group Insurance Company Limited, ultimately owned by Bank of China Limited (BOC, deposits A1 negative, BCA baa1). 

The negative outlook of BOC Life's A1 insurance financial strength rating (IFSR) acknowledges its good profitability and solid capitalisation, supporting self-sustained business growth while recognising potential challenges, including high reliance on savings-type products with lower margins and exposure to corporate bonds sensitive to credit spreads.

Factors that could lead to an upgrade are limited due to the negative outlook. 

ALSO READ: AIA Group releases climate action plan, target net-zero by 2050

However, Moody's could return the outlook to stable if the rating outlook for BOC Hong Kong improves, or there is a significant enhancement in BOC Life's standalone credit profile through diversified distribution channels, improved profitability (ROC consistently above 12%), reduced high-risk asset exposure, and strengthened capital adequacy.

Downgrade risks include deteriorating profitability (ROC below 8% on a sustained basis), sustained weakening of capital adequacy, a downgrade of BOC Hong Kong's rating, and a decline in the ability or willingness of shareholders and affiliates to provide support.