SHKPI is a wholly owned subsidiary of Sun Hung Kai Properties Limited (SHKP), one of the largest and most well-established property development and investment conglomerates in Hong Kong.
The ratings reflect SHKPI’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The balance sheet strength assessment mainly reflects SHKPI’s low business net retention and moderate underwriting leverage. In addition, the company’s underwriting operations have been highly profitable and cash-generative. However, SHKPI’s investment portfolio shows an appetite to invest in higher-risk assets, which exposes its overall earnings to considerable market and credit risks. These risks are mitigated partially by the company’s significant level of excess capital.
Despite the soft market in Hong Kong in recent years, SHKPI has continued to generate strong and consistent operating profits, supported mainly by the company’s low acquisition cost structure, as well as by a steady stream of interest and dividend income. As a wholly owned subsidiary of SHKP, SHKPI underwrites insurance business associated with SHKP-related construction projects on a direct basis, which makes its acquisition cost ratio generally lower than its peers. Additionally, SHKPI’s investment portfolio is managed by SHKP’s investment arm, which has a long track record of delivering positive returns over different phases of the investment cycle.
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