AM Best Affirms Credit Ratings of The People’s Insurance Company of China (Hong Kong), Limited

HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) 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 assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the strategic importance of the company to its parent, The People’s Insurance Company (Group) of China Limited (PICC Group) (China), as the sole overseas insurance entity and a key component of PICC Group’s overseas strategies.

PICC HK’s very strong balance sheet is underpinned by its strongest risk-adjusted capitalisation level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company maintains strong liquidity and holds a well-diversified investment portfolio, which mainly consists of investment-grade bonds, cash and cash equivalents, as well as preference shares, with the remainder allocated in listed equities and funds.

AM Best assesses PICC HK’s operating performance to be adequate. The company has achieved a five-year average operating ratio of 95.0% (2018-2022), mainly supported by its robust net investment income from its diversified investment portfolio. In 2022, PICC HK maintained positive underwriting results; nonetheless, it is offset by realised losses from funds and shares amid unfavourable market conditions, resulting in a net loss for 2022. The five-year average return-on-equity ratio stays positive.

The company’s business profile is assessed as limited. PICC HK underwrites direct onshore general insurance in Hong Kong and inward reinsurance from mainland China and other geographic regions. The company’s underwriting portfolio is exposed to moderate concentration risk in terms of sourcing premium revenue from its affiliated company, PICC Property and Casualty Company Limited, despite the stable profit margin. While its presence in the Hong Kong local market remains modest, PICC HK has been actively expanding its inward reinsurance portfolio in recent years, which helps to diversify its client base. With the establishment of its Macau branch in 2022, PICC HK is eligible to provide one-stop motor insurance policy covering mainland China’s greater bay area, Hong Kong and Macau.

PICC HK maintains its strategic importance to PICC Group, it being the sole overseas insurance entity within the group. PICC HK plays a key role in deploying the group’s overseas strategies, and the company benefits from group support implicitly and explicitly. PICC HK gains from the overall operational synergies that are throughout the group, especially in the areas of underwriting, investment management and risk management. As a way of explicit support from the group, there is a track record of capital injections to PICC HK from PICC Group, since PICC HK’s establishment in 2002; the latest being a capital injection of HKD 970 million in December 2020.

Positive rating actions could occur if PICC HK further enhances its market presence in the local insurance market, as well as further diversifies its reliance on affiliated companies and continues improving its business profile. Negative rating actions could occur if there is a decline in the company’s operating performance to a level that no longer supports AM Best’s adequate operating performance assessment, or if the support PICC HK receives from its parent weakens notably or the parent’s credit fundamentals deteriorates materially.

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 AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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