Taiping Re's capital and surplus have more than doubled over the past five years, mainly driven by a series of capital injections from China Taiping Insurance Holdings Company Limited (CTIH) and profit retention.
Going forward, the company’s risk-adjusted capitalisation to remain solid over the short to medium term, underpinned by the anticipated continued capital and financial support from the parent to offset the increasing risk profile, says A.M.Best, as it affirms the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Taiping Re and its wholly owned subsidiary, Taiping Re China. The outlook of these credit ratings is stable.
A.M.Best says that the ratings reflect Taiping Re’s balance sheet strength, which the international credit rating agency categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also acknowledge the continued holistic implicit and explicit support from the parent company, CTIH, in terms of capital and investment, as well as the high level of integration in business development and operations, in addition to risk management.
A.M.Best says that Taiping Re has demonstrated a track record of profitable operating results, mainly attributed to favourable investment income from bonds and loan-type investments, as well as consistently positive underwriting results. Taiping Re’s non-life portfolio is geographically diversified with a focus in Asia while the company has also been actively expanding its life reinsurance business.
The ratings of Taiping Re China reflect its strategic importance to Taiping Re, as well as its high level of integration with, and the explicit support it receives from, Taiping Re. Taiping Re China is the primary revenue contributor to Taiping Re’s China-based business. The subsidiary accounted for approximately 52% of Taiping Re’s consolidated non-life gross written premiums in 2017.
Offsetting rating factors include downward pressure on non-life underwriting margin stemming from the robust expansion in business from China. The anticipated growth in property business will also expose the company to higher catastrophe exposure, although A.M. Best expects this risk to be mitigated by the company’s adequate retrocession arrangements. In addition, the company’s investment portfolio is exposed to some concentration risk from single investments in bonds and mutual funds.