HONG KONG--(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.
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