HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of China Taiping Insurance (HK) Company Limited (CTPIHK) (Hong Kong). The outlook for both ratings is stable.
The ratings reflect CTPIHK’s excellent risk-adjusted capitalization, strong market presence in Hong Kong’s non-life insurance market and consistent operating profits over the past five years.
CTPIHK’s risk-adjusted capitalization level, as reflected by Best's Capital Adequacy Ratio (BCAR), is strong and supportive of its current ratings despite its strong premium growth since 2012. CTPIHK has maintained strong local market presence and a recognized brand during its long operating history in the Hong Kong non-life insurance market. The company has increased premium revenues in recent years by leveraging on existing and new relationships established at Taiping Group level with Chinese enterprises and broadening its distribution channels in Hong Kong using financial institutions. Operating results have been overall favorable largely due to strong investment earnings and a much stabilized underwriting performance after the divestment of its former operation in mainland China since 2010.
Offsetting rating factors are the unfavorable or volatile underwriting results in Hong Kong’s motor and employees’ compensation, two of CTPIHK’s major portfolios where profit margins are expected to continue to be under pressure due to soft prices and Hong Kong’s competitive environment. Other offsetting factors are the risk of high volume growth and potential earnings volatility arising from CTPIHK’s exposure in the Hong Kong property market, an area in which any adverse movement could have an unfavorable impact on CTPIHK’s operating performance.
Positive rating actions could occur if CTPIHK develops a stronger business profile in Hong Kong and demonstrates stable and profitable underwriting results, while maintaining its strong risk-adjusted capitalization level and further developing risk management practices. Negative rating actions could occur if CTPIHK’s underwriting results deteriorate significantly or there is a material decline in its risk-adjusted capitalization level.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
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