Best Affirms Wing Lung Ratings

February 19, 2007

A.M. Best Co. has affirmed the financial strength rating of “A”- (Excellent) and the issuer credit rating of “a-” of Hong Kong-based Wing Lung Insurance Company Limited (WLI) with a stable outlook.

“The ratings reflect WLI’s adequate capitalization, consistent positive operating results and prudent investment portfolio,” said Best, noting the Company’s “solid capital position.”

WLI’s capital and surplus increased to HKD 594 million ($ 76 million) in 2005 from HKD 518 million ($67 million) in 2004. Best’s said its “Capital Adequacy Ratio, which measures the capitalization on a risk-adjusted basis, demonstrates that WLI is adequately capitalized, although higher total asset risks due to increased investments in fixed income instruments and equities moderately weakened the company’s risk-based capitalization in 2005.

“Despite the current softening market conditions, the company has consistently achieved positive operating results with an average combined ratio of 87 percent over the past five consecutive years. Retained profits from positive underwriting results and the improved investment return are expected to further enhance the company’s capitalization in the near term.

While WLI has increased its exposure to fixed income instruments and equities in 2005, the liquidity position of its investment portfolio remains strong. Cash and cash equivalent assets still represented about 42 percent of WLI’s total assets in 2005. Stable investment yield from the prudent investment portfolio will continue to be the key contributor to the financial stability of the company.

Best noted, however that the “continued decline in the underwriting profitability of WLI’s employees’ compensation (E/C) line and narrow spread of risk due to its heavy concentration in general liability business,” should be taken into account as offsetting factors.

“WLI recorded an increase in the combined ratio of its E/C line from 102 percent in 2004 to 113 percent in 2005, further reflecting the deterioration of the underwriting profitability of this line. Given its heavy concentration on general liability business, the prevailing soft market environment along with intense market competition could potentially undermine the stability of its overall underwriting profitability going forward.”

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