Sun Hung Kai Properties Insurance de-risking exposure improves bond credit quality – AM Best

The insurance company de-risked majority of its bonds in China in 2023.

Sun Hung Kai Properties Insurance Limited (SHKPI) showed promising performance after it de-risked the majority of its bond exposure in China in 2023.

According to AM Best’s latest report, this happened even after SHKPI's “higher-risk financial assets, including unlisted investments and non-investment-grade bonds, exposed its risk-adjusted capitalisation to considerable market and credit risks.”

The company de-risked the majority of its bond exposure to China’s real estate sector in 2023, with its bond portfolio demonstrating an improvement in the credit quality with higher diversification level. 

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AM Best noted SHKPI’s “very strong balance sheet strength assessment” underpinned by the company’s risk-adjusted capitalisation at the strongest level, as measured by the Capital Adequacy Ratio. 

“AM Best considers SHKPI’s capital level provides a sufficient buffer to absorb investment risks. Other supporting factors include the company’s strong liquidity position and appropriate reinsurance programme, with a diversified panel of financially sound reinsurers,” the agency explained. 

SHKPI has been showing strong operations in the past years, with its 2023 net profit being a result of a recovery in investment performance and stable underwriting profit. It also continues to benefit from its parent company’s support, both in distribution channels with minimal gross acquisition expenses as well as in access to better quality group business.

The company’s investment returns turned positive last year driven by favourable interest income owing to a high interest rate environment.