Investment income to steer China Taiping Insurance’s bottom line: AM Best

CTPI is expected to maintain a prudent investment strategy and stringent risk management in the future.

AM Best expects China Taiping Insurance Hong Kong's (CTPI) investment income to continue driving the bottom line while underwriting performance remains marginal, despite the return on equity (ROE) for 2022 being 2.4%, slightly higher than the five-year average.

AM Best has confirmed CTPI financial strength rating and its long-term issuer credit rating as ‘excellent’.

These ratings affirm CTPI’s robust balance sheet strength, assessed as very strong by AM Best, along with its satisfactory operating performance, neutral business profile, and effective enterprise risk management (ERM). The ratings incorporate the positive influence from its parent company, China Taiping Insurance Holdings Company Limited (CTIH).

CTPI's extreme balance sheet strength is supported by its risk-adjusted capitalisation, measured by Best’s Capital Adequacy Ratio (BCAR), at the strongest level. The company's capital and surplus (C&S) remained stable at HK$5.1b at the end of 2022, with a subsequent increase in the first nine months of 2023 due to positive investment fair value changes amid capital market recovery. 

During this period, CTPI's invested assets mainly comprised income-generating securities, with a focus on bonds and investment properties. 

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The company also reduced exposure to listed shares and private funds while de-risking its investment portfolio by lowering exposure to non-investment grade or non-rated bonds and private equity funds. 

AM Best anticipates CTPI to maintain a prudent investment strategy and stringent risk management in the future.

CTPI's operating performance is considered adequate, with profitability over the last decade, except for 2020 when a significant impairment loss from private funds impacted results. The company reported a net profit of HK$123.4m in 2022, driven by net investment income. 

The business profile of CTPI is deemed neutral, with a 4.2% market share in Hong Kong's non-life market in 2022. The company's direct premium growth was attributed to increases in motor, ship, accident and health lines. CTPI aims to maintain its market position in Hong Kong and build a balanced portfolio focusing on direct business in the short to medium term.

CTPI is a crucial overseas operating subsidiary of China Taiping Insurance Group Ltd (TPG), playing a significant role in TPG's overseas footprint and Greater Bay Area strategy. The company receives implicit support from TPG regarding brand recognition, investment, reinsurance, and operations. AM Best expects parental support for CTPI to remain consistent in the short to medium term.

substantial decline in CTPI's risk-adjusted capitalisation or absolute capital size could entail a negative rating action. Additionally, sustained deterioration in operating performance could lead to negative rating actions.