Singapore, 28 June 2019: AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of China Taiping Insurance (Singapore) Pte. Ltd. (CTIS) (Singapore). The outlook of these Credit Ratings (ratings) is stable. CTIS is a wholly owned subsidiary of China Taiping Insurance Holdings Company Limited. (CTIH). The ultimate parent is China Taiping Insurance Group Ltd. (TPG), a Chinese state-owned financial and insurance group headquartered in Hong Kong.
The ratings reflect CTIS’ balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). In addition, CTIS benefits from rating enhancement from the TPG group.
CTIS’ balance sheet strength assessment is underpinned by risk-adjusted capitalization that AM Best expects to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). Despite increasing capital requirements being forecast over the next three years, arising from the company’s planned expansion into Singapore’s life insurance market, a series of capital injections and the ongoing financial commitment from TPG are expected to support this new business growth. A partially offsetting factor is the company’s modest absolute capital base, which increases the sensitivity of capital adequacy to growth beyond expectation or weaker than expected performance.
The company’s non-life operations have performed favorably historically, as evidenced by a five-year average combined ratio of 92% (2014-2018). Despite this, a deteriorating trend in non-life performance has been exhibited over recent years, driven by increasing loss and expense ratios. Overall earnings remained positive from 2014 to 2017. However, as a result of initial costs and technical provisions associated with CTIS’ commencement of its life insurance activities, the company recorded a pre-tax operating loss of SGD 26.8 million in 2018 (2017: profit of SGD 7.9 million). While AM Best expects CTIS to exhibit adequate operating performance over the medium term, the aforementioned establishment of CTIS’ life insurance operations is expected to drive elevated expenses and result in dampened earnings over the near term.
CTIS’ business profile is assessed as neutral. The company is a medium sized player in Singapore’s non-life insurance market, with a market-leading position in the domestic bond insurance segment. Following the approval of its life insurance license in 2018, CTIS also is expected to establish itself over the medium term as a provider of life insurance protection, savings and retirement planning products for high net worth and affluent individuals in Singapore. Life insurance operations are expected to grow notably over the next three years. Prior to entering Singapore’s life market, CTIS conducted detailed feasibility studies and the execution of its growth strategy will benefit from ongoing technical support and guidance from the TPG group.
The company’s ERM framework is considered to be developed and its risk management capabilities typically appropriate relative to the profile of its key risks. Nonetheless, AM Best views the start-up nature of CTIS’ life operations to result in a heightened level of execution risk over the medium term.
CTIS’ ratings incorporate rating enhancement from the TPG group. Despite CTIS’ operations accounting for a relatively small portion of the group’s revenues and earnings, it is considered important to the group in terms of accessing the Singapore insurance market and growing its overseas business. CTIS benefits from both implicit and explicit support from group companies that form part of TPG.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.