AM Best affirms A rating for Taiping Reinsurance with stable outlook

AM Best has affirmed the financial strength rating of A (Excellent) and the Long-term issuer credit rating of “a” (Excellent) for Taiping Reinsurance Company Limited (TPRe) based in Hong Kong and its subsidiary, Taiping Reinsurance (China) Company Ltd. (TPRe China) based in China. The outlook for these ratings remains stable.

The ratings reflect TPRe’s balance sheet strength, assessed as very strong by AM Best, as well as its operating performance, which is viewed as adequate. The company maintains a neutral business profile and appropriate enterprise risk management.

The ratings also factor in continued support from TPRe’s parent company, China Taiping Insurance Holdings Company Limited (CTIH), which provides capital, investment oversight, risk management, and shared resources.

AM Best expects TPRe’s risk-adjusted capitalization to remain strong in the near to medium term, backed by its financial flexibility and the improvement in the credit profile of its investment portfolio. However, offsetting factors include TPRe’s exposure to potential catastrophe losses and challenges with asset quality related to legacy investments amid volatile capital markets.

In 2023, TPRe reported a net profit of HKD 333.0 million, with a return-on-equity (ROE) ratio of 3.0%, based on HKFRS 17 standards. The reinsurer’s non-life insurance service results remained stable, driven by property lines, with a combined ratio of 95.9%, as calculated by AM Best.

The life insurance segment, however, saw some volatility as TPRe shifted away from its saving-type reinsurance portfolio and expanded its protection-type business. TPRe’s overall investment performance remained stable, primarily due to interest income from fixed-income investments, although this was partially offset by impairment losses on financial assets.

As a subsidiary of CTIH, TPRe holds a strong position in the Greater China region, particularly in the non-life reinsurance markets in Hong Kong and Macau. The company continues to expand into other regions, particularly Southeast Asia, while maintaining a partnership with strategic investor Ageas for product development and reinsurance arrangements.

AM Best expects CTIH to continue providing financial support to TPRe when needed, as demonstrated by previous capital injections.

Negative rating actions could occur if CTIH’s credit profile materially deteriorates or if it reduces its support for TPRe. Similarly, a sustained decline in TPRe’s operating performance could lead to a downgrade.

On the other hand, positive rating actions, though less likely, could occur if there is significant improvement in CTIH’s credit profile, such as through reduced financial leverage or a stronger capital position.

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