The negative outlooks reflect TIC’s limited business profile, poor and increasingly volatile underwriting performance and negative operating cash flows.

TIC has materially reduced new business in its poorly performing Hong Kong employee compensation business and ceased retaining net exposures on those policies since 2014. Without growth from other sources, its net premium declined from over USD 20 million in 2013 to approximately USD 5 million in 2016. However, adverse development of prior-year employee compensation claims and higher expense ratios have resulted in increasingly volatile and poor underwriting results, negative operating cash flows and declining liquidity ratios since 2014. In 2016, this led to a USD 14 million net loss and a 30% decline in TIC’s capital.

A positive rating factor is TIC’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which remains strong. The company is in the process of converting a self-occupied, high grade commercial property into investment properties and expects additional rental income.

A revision to a stable outlook could result from a positive trend in operating cash flow, a strengthening in liquidity buffers, as well as a stable and favorable trend in TIC’s pre-tax margin and combined ratio.

Negative rating actions could result from a material decline in TIC’s capital position due to shareholder repatriation of capital or negative operating results that drive a further decline in TIC’s liquidity.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.

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