Best’s News & Research Service - September 28, 2018 01:12 PM (EDT)
A.M. Best Affirms Credit Ratings of Taiping Reinsurance Company Limited and Its Subsidiary
- September 28, 2018 01:12 PM (EDT)
Hong Kong //BestWire// - A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Taiping Reinsurance Company Limited (Taiping Re) (Hong Kong) and its wholly owned subsidiary, Taiping Reinsurance (China) Company Ltd. (Taiping Re China) (China). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Taiping Re’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also acknowledge the continued holistic implicit and explicit support from the parent company, China Taiping Insurance Holdings Company Limited (CTIH), in terms of capital and investment, as well as the high level of integration in business development and operations, in addition to risk management.
Taiping Re’s capital and surplus has more than doubled over the past five years, mainly driven by a series of capital injections from CTIH and profit retention. Going forward, A.M. Best expects the company’s risk-adjusted capitalization to remain solid over the short to medium term, underpinned by the anticipated continued capital and financial support from the parent to offset the increasing risk profile.
The company has demonstrated a track record of profitable operating results, mainly attributed to favorable investment income from bonds and loan-type investments, as well as consistently positive underwriting results. Taiping Re’s non-life portfolio is geographically diversified with a focus in Asia while the company has also been actively expanding its life reinsurance business.
The ratings of Taiping Re China reflect its strategic importance to Taiping Re, as well as its high level of integration with, and the explicit support it receives from, Taiping Re. Taiping Re China is the primary revenue contributor to Taiping Re’s China-based business. The subsidiary accounted for approximately 52% of Taiping Re’s consolidated non-life gross written premiums in 2017.
Offsetting rating factors include downward pressure on non-life underwriting margin stemming from the robust expansion in business from China. The anticipated growth in property business will also expose the company to higher catastrophe exposure, although A.M. Best expects this risk to be mitigated by the company’s adequate retrocession arrangements. In addition, the company’s investment portfolio is exposed to some concentration risk from single investments in bonds and mutual funds.
Positive rating actions are unlikely in the near term. Negative rating actions may occur if there is a deteriorating trend in the company’s risk-adjusted capitalization or if CTIH reduces the level of support it provides to Taiping Re.
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. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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