Fitch ratings has affirmed the “A” Issuer Default Ratings (IDR) of China Taiping Insurance Group Ltd. (TPG), China Taiping Insurance Group (HK), Company Limited (TPG(HK)), and China Taiping Insurance Holdings Co Ltd’s (CTIH).
Fitch has also affirmed the “A+” Insurer Financial Strength (IFS) of Taiping Life Insurance Co. and the “A” IFS rating of Taiping Reinsurance Co., Ltd. (TPRe).
The outlook on all ratings is stable.
Key rating drivers
According to Fitch, “the rating affirmation reflects TPG’s improving capital strength on a consolidated basis; sound operating profitability; and broad revenue sources with strong growth dynamics”.
Fitch’s affirmation of TPG’s IDR is partly due to the firm’s being wholly and directly owned by China’s Ministry of Finance. Fitch believed that, if needed, the Chinese government can provide the firm with capital and/or policy support.
TPG’s overall capital strength and financial flexibility has improved owing to surplus growth and issue of new share by CTIH. The firm’s Fitch Prism factor-based model score on a consolidated basis was upgraded from “Strong” at the end of 2014 to “Very Strong”. The ratio of TPG’s consolidated shareholder’s equity to total non-linked assets amounted to 13.3%, as compared to end-2014’s 10.1%. Not including the bank loans for finance lease receivables, the firm’s consolidated financial leverage dropped from 40% to 27%.
TPL and Taiping General Insurance Company Limited (TPI)’s statutory solvency ratio calculated under the new solvency regime at end-1Q16 was 250% and 263% respectively. Fitch expects TPG to maintain a sufficient capital buffer for supporting the expansion of its insurance subsidiaries and for buffering potential asset volatility, said the ratings agency.
Fitch recognises the role of TPL within TPG as a core operating subsidiary as it makes significant contributions to earning to TPG as a whole. It continued to report solid growth in its new business value (NBV), with its emphasis on the distribution of regular long-term protection type life products. There was a further increase in the proportion of business and NBV margin from its individual agency force. The company also reported a 13% growth in its value of in-force business in 2015.
Fitch’s affirmation of TPRe is based on the favourable underwriting result of its non-life reinsurance portfolio, solid solvency buffer, and its strategic status as a “very important” subsidiary within the group, as defined by Fitch. The combined ratio of TPRe’s non-life operation in 2015 was 91.4%, offsetting the operating losses from its life reinsurance business, reported Fitch.