AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of China Taiping Insurance (HK) Company Limited [CTPI(HK)] (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect CTPI(HK)’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also incorporate the rating enhancement that CTPI(HK) receives from its parent, China Taiping Insurance Holdings Company Limited (CTIH).

CTPI(HK)’s very strong balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). Evaluated under the HKFRS 17 accounting standard, CTPI(HK)’s capital and surplus improved by 2.4% to HKD 5.3 billion (USD 679 million) in 2023. The company has maintained a healthy regulatory solvency ratio under the Hong Kong risk-based capital framework, with a healthy buffer over the regulatory minimum. Its invested assets allocation remained largely consistent in 2023 and during the first half of 2024, predominantly comprising income-generating securities including bonds and investment properties with limited exposure in listed shares and private funds. Moreover, the company has continued to bolster its bond portfolio by reducing exposure to non-investment grade or non-rated bonds. Going forward, AM Best expects CTPI(HK) to continue adopting a prudent investment strategy and stringent risk management. Other supporting factors include appropriate reinsurance arrangements and comparatively low underwriting leverage. Over the short to medium term, AM Best expects CTPI(HK) to maintain an abundant buffer for its risk-adjusted capitalisation.

AM Best assesses CTPI(HK)’s operating performance as adequate. Over the past decade, the company has stayed profitable with the exception of 2020, when its performance was dragged by a sizeable impairment loss from private funds. The company’s overall underwriting performance has been improving since 2019, with its IFRS 17 combined ratio remaining below 100% in 2023, according to AM Best calculations. Its net investment income remains robust with a mid- single-digit investment yield not including gains or losses, owing to income-generating invested assets including bonds and investment properties. Under HKFRS 17, the return on equity was 4.5%. Going forward, AM Best expects CTPI(HK)’s investment income to continue being the driver of the bottom line, while its underwriting margin remains thin.

AM Best assesses CTPI(HK)’s business profile as neutral. The company has been a longstanding player in Hong Kong’s highly competitive general insurance segment, with market share of 4.3% in terms of onshore gross premiums written in 2023 per local regulator’s statistics. CTPI(HK) has a diversified underwriting portfolio in terms of business lines, and underwrites both direct and inward reinsurance businesses. Its premium growth in 2023 was driven by direct business, mainly in motor, general liabilities, ship and property lines. Over past three years, CTPI(HK) has reduced its reliance on inward business by increasing local direct premiums. Going forward, AM Best expects CTPI(HK) to maintain its market position in Hong Kong and continue to build a balanced portfolio focusing on direct business over the short to medium term.

CTPI(HK) is a strategically important overseas operating subsidiary of China Taiping Insurance Group Ltd. (TPG). The company plays a vital role in TPG’s footprint overseas and its strategy in the Greater Bay Area. CTPI(HK) is integrated in the group’s capital management and ERM. Additionally, CTPI(HK) receives a series of implicit support from TPG, including brand recognition, investment, reinsurance and operations. AM Best believes the parental support rendered to CTPI(HK) will remain at a similar level in the short to medium term.

Negative rating actions could occur if there is a material decline in CTPI(HK)’s risk-adjusted capitalisation and/or in absolute capital size. Negative rating actions also could occur if there is a sustained deterioration in its operating performance. Negative rating actions also may result if there is a change in the credit profile of CTIH and/or TPG, or from a reduced level of support from either or a reduction in CTPI(HK)’s strategic importance and integration to CTIH or TPG.

Albeit less likely in the near term, positive rating actions could occur if CTPI(HK) demonstrates a sustained improvement in its operating performance better than its industry peers, while the credit profile of CTIH and TPG materially strengthens.

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

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