Best’s News & Research Service - June 19, 2020 09:31 AM (EDT)
AM Best Comments on Credit Ratings of Taiping Reinsurance Company Limited Following Disclosure on Potential Issuance of Shares
- June 19, 2020 09:31 AM (EDT)
Hong Kong //BestWire// - AM Best has commented that the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” of Taiping Reinsurance Company Limited (TPRe) (Hong Kong) and its wholly owned subsidiary, Taiping Reinsurance (China) Company Ltd. (TPRe China) (China), remain unchanged following the disclosure of a potential issuance of shares by TPRe announced on 17 June 2020.
Per the announcement, China Taiping Insurance Holdings Company Limited (CTIH), the parent company of TPRe, is considering a potential issuance of shares by TPRe to external investors. The target amount to be raised from the issuance is approximately HKD 3.1 billion, which constitutes approximately 25% of CTIH’s stake in TPRe. Commencing on 18 June 2020, this potential transaction is undergoing a public tender process for at least 40 working days.
AM Best currently categorises TPRe’s balance sheet strength as very strong. The company’s capital and surplus has grown at a combined average growth rate of 15.1% during the five-year period from 2015 to 2019, mainly driven by capital injections from CTIH and the partial retention of operating profits during the period. AM Best expects that the potential issuance will further strengthen TPRe’s consolidated risk-adjusted capitalisation over the medium term and at the current rating level. Upon materialisation of the potential issuance, AM Best will continue to hold discussions with TPRe’s management over the change in shareholding structure and the subsequent implications on its business profile and rating fundamentals.
In accordance with Best’s Credit Rating Methodology, AM Best continues to view TPRe as a non-lead rating unit of the broader parent organisation, CTIH, which may afford lift or drag to TPRe based on factors such as integration, implicit and explicit support, strategic importance and contribution to the overall enterprise.
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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