LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” of China Taiping Insurance (UK) Company Limited (CTIUK) (United Kingdom). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CTIUK’s strategic importance to its ultimate parent, state-owned China Taiping Insurance Group Ltd. (China Taiping), as a means to access European insurance markets. Additionally, CTIUK receives operational and reinsurance support from the China Taiping group and benefited from a capital injection in 2015 to support its expansion strategy. The ratings also reflect CTIUK’s solid risk-adjusted capitalisation and operating performance, as well as its niche but limited business profile.
CTIUK's risk-adjusted capitalisation remains at a solid level, benefiting from an enhanced capital base following a GBP 10 million injection from its parent in 2015. Additionally, the company’s shareholders’ funds are supplemented by positive earnings retention. Going forward, growth of capital requirements to support underwriting risks combined with a higher investment risk profile, owing to the company’s strategic decision to increase its exposure to unquoted assets, are expected to materially erode risk-adjusted capitalisation. Nonetheless, A.M. Best expects CTIUK’s balance sheet strength to support the company’s rating level.
CTIUK’s operating performance is solid, as demonstrated by a five-year weighted average return on premium of 12.2% and a return on equity of 5.2%. Operating performance has been supported by improving underwriting results, partly driven by prior-year reserve releases, while investment earnings have been subject to volatility. A.M. Best expects CTIUK to report solid net profits in 2016, driven by higher unrealised gains arising from the good performance of its government bonds and equity portfolios.
CTIUK is a small, niche insurer that caters to the needs of specific small and medium-sized enterprises (SME) sectors and Chinese communities and organisations established in the U.K., and a select number of other European countries. In recent years, the company has been focused on increasing the diversity of its product offerings, which has resulted in CTIUK entering into new markets, such as the Italian bond sector; underwriting new lines of business, such as mobility insurance (which covers products such as scooters and stair lifts); and increasing its SME and personal lines range of products. As a result, CTIUK has experienced double-digit growth rates in gross written premiums over the past four years, supported by the expansion of its network of brokers and managing general agents. Nonetheless, A.M. Best believes growth opportunities are constrained currently by CTIUK’s limited competitive presence in European markets. The company’s expansion plan carries with it execution risk, and A.M. Best will continue to closely monitor the performance of new business lines.
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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