AM Best Affirms Credit Ratings of The People’s Insurance Company of China (Hong Kong), Limited
July 19 2024 - 10:22AM
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 risk-adjusted capitalisation, as measured by Best’s
Capital Adequacy Ratio (BCAR), remained at the strongest level at
year-end 2023. The company’s investment portfolio remains
well-diversified, with the majority of its assets allocated to
investment-grade bonds, cash and cash equivalents, and preference
shares, while the remainder is in listed equities and other
investments. With an increasing proportion of liquid invested
assets, the company has maintained a strong liquidity position.
Other supporting factors include a strong regulatory solvency
position, both under the legacy Hong Kong Insurance Ordinance and
Hong Kong’s new risk-based capital regime.
PICC HK’s operating performance remains adequate. The company
returned to profitability in 2023, with net earnings mainly
supported by robust investment income owing to its diversified
investment portfolio. In 2023, PICC HK achieved positive
underwriting results, driven by its profitable inward business.
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
Hong Kong’s domestic market remains modest, PICC HK has actively
expanded its inward reinsurance portfolio in recent years with a
higher retention ratio in 2023, which helps to diversify its
business sources. PICC HK established its Macau branch in 2022 to
better satisfy insurance demand from Portuguese-speaking countries
of the world, as well as to provide one-stop general insurance
solutions covering mainland China’s greater bay area, Hong Kong and
Macau.
As the group’s sole overseas insurance entity, PICC HK continues
to be of strategic importance to the PICC Group. PICC HK plays a
key role in deploying the group’s overseas strategies, and benefits
from its support implicitly and explicitly. As a way of explicit
support from the group, there is a track record of multiple capital
injections to PICC HK from PICC Group; the latest being a capital
injection of HKD 970 million in December 2020. The company has also
benefited from the group’s operational synergies, especially in the
areas of underwriting, investment management and risk
management.
Positive rating actions could occur if PICC HK further bolsters
its presence in its domestic insurance market, further diversifies
its reliance on affiliated companies and continues to improve its
business profile. Negative rating actions could occur if there is a
decline in PICC HK’s operating performance to a level that no
longer supports AM Best’s adequate operating performance
assessment, or if the support the company receives from its parent
weakens notably or the parent’s credit fundamentals deteriorate
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.
AM Best is a global credit rating agency, news publisher and
data analytics provider specialising in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
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Aaron Li Associate Financial Analyst +852 2827 3426
aaron.li@ambest.com Lucie Huang Senior Financial Analyst +852
2827 3414 lucie.huang@ambest.com Christopher Sharkey
Associate Director, Public Relations +1 908 882 2310
christopher.sharkey@ambest.com Al Slavin Senior Public Relations
Specialist +1 908 882 2318 al.slavin@ambest.com