Hang Seng Insurance to benefit from parental ties

It is expected to penetrate its parent’s client base further.

Hang Seng Insurance is expected to continue to benefit from its parental ties to Hang Seng Bank and HSBC.

The insurer, which operates under an exclusive bancassurance model, is expected to benefit from access to the customer base of Hang Seng Bank, S&P Global Ratings said in a ratings commentary, where it gave Hang Seng Insurance a “stable” outlook.

Hang Seng Insurance is expected to remain integral to the retail banking and wealth management strategy of HSBC Hong Kong.

It also enjoys strong and long-term parent support in terms of capital, business strategy, digital capability, risk management, and governance, S&P said.

“We anticipate the insurer will further penetrate its parent's large client base. Its new business sales increased a strong 93% year on year in the first six months of 2024,” it added.

The insurer should also be able to share more earnings with its parent over the next two years.

Its regulatory solvency ratio of 221% as of end-2023, signifying a strong regulatory capital position, the ratings agency said.

“The parent bank will also likely extend additional subordinated loans to Hang Seng Insurance to optimize its capital structure under the new risk-based capital regime,” S&P said.

Capital, investment risk
However, Hang Seng Insurance is expected to maintain a capital position marginally below S&P’s risk-based capital requirements at the 99.5% confidence level. This is due to its increasing allocations to high-risk assets. Such assets include equities and alternative investments.

“This strategy may demand more capital and heighten sensitivity to investment risk over the next two years,” S&P said, although it assessed the insurer’s capital and earnings as “satisfactory.”

The insurer is also noted for its supposed prudent investment management, bolstered by its parent bank's controls on credit and market risks; and consistent value generation.

These will continue to underpin the insurer's satisfactory financial risk profile, S&P said.