HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of The People’s Insurance Company of China (Hong Kong), Limited (PICC HK) (Hong Kong). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect PICC HK’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings also reflect the lift that the company receives from its parent, The People’s Insurance Company (Group) of China Limited (PICC Group).
PICC HK is well-capitalized at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The insurer’s capital and surplus position was strengthened in 2017, owing to a capital injection of HKD 140 million (USD 17.9 million) from its two shareholders, PICC Group and Asia Insurance (Investments), Limited, which own 75% and 25% of PICC HK, respectively. The company maintains a liquid investment portfolio, approximately 90% of which is allocated to investment-grade bonds, as well as cash and cash equivalents.
The company has generated net profits consistently over the past five years, mainly attributable to a solid stream of interest income. Such income helped to offset underwriting losses in 2017 and 2018, which were mainly due to catastrophe losses and underwriting losses of the employees’ compensation line in its direct book of business.
As the PICC Group’s sole overseas insurance subsidiary, PICC HK plays a strategic role in the group’s development abroad. While the inward treaty from its affiliated company, PICC Property and Casualty Insurance Company Limited, continues to contribute a significant volume of business, the company also has been growing its direct and third-party inward reinsurance businesses considerably to diversify its business portfolio. Overall, PICC HK’s underwriting capacities have increased, supported by the recent capital injection, and its gross premiums grew notably by 46% in 2018. Offsetting rating factors include PICC HK’s limited business profile, as reflected by its small presence in Hong Kong’s non-life insurance market. The company mainly underwrites commercial line business in its competitive domestic market, which has been subject to a prolonged soft pricing environment.
Negative rating actions could occur if PICC HK’s operating performance continues to deteriorate, or the company’s ERM fails to contain emerging risks from the evolution of its business profile. A reduced level of support from the PICC Group and its affiliates, or deterioration in the group’s credit profile also may place negative rating pressure on PICC HK.
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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