Standard & Poor's decision last month to assign Pacific Century Insurance a below-investment-grade credit rating is not a true reflection of its value, according to deputy chairman and chief executive Andrew Yang Fan-shing. The rating was based on out-dated financial information, Mr Yang said. 'When they learn about our most up-dated financial figures, they will have a different decision,' he said. He said the insurer had tried to contact Standard & Poor to discuss the rating. United States-based Standard & Poor's said it assigned a Bpi rating to the newly listed insurer because of its 'overall weak financial strength'. The move was a blow to Pacific Century, because many fund managers are restricted from investing in securities with a non-investment-grade rating. Mr Yang said the insurer had no plans to issue shares or debt securities in the near future, and would not be hurt by the rating in this period. Standard & Poor's rating for the company was based on figures at the end of last year, when its capital amounted to only $355.6 million, he said. After the insurer's share offering in June, its capital had risen, and stood at more than $900 million now, Mr Yang said. He also rejected the credit-rating agency's view that Pacific Century Insurance's extensive use of financial reinsurance would weaken its income base. The insurer has sold 35 per cent of its new life policies to reinsurers, Standard & Poor's said. Insurance companies typically sold only 5 to 10 per cent of their life business in this way, the agency said. A reinsurance arrangement is a risk-management practice in which a life insurer sells some of its policies to reinsurance companies. Under such an arrangement, the insurer then receives commission from the reinsurance company with the effect of bolstering immediate earnings. Later, the insurer passes on this premium income to the reinsurer, reducing its income. Mr Yang said the reinsurance arrangement was a cheaper way to get capital than borrowing from banks. 'We would maintain about 30 per cent of our business to have the reinsurance arrangement as we believed it would bring profit to our shareholders,' he said. Meanwhile, the insurer yesterday introduced two products that allow clients to pay lower premiums than normal insurance policies. The policies would offer the same amount of insurance cover, but they would have less cash-saving value than the normal insurance products, Mr Yang said. These would be suitable for those clients who wanted to have the insurance cover but did not want the saving-plan features of the policies, he said. INSURANCE