AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of a of China Taiping Insurance (Macau) Co., Ltd. (CTIM) (Macau). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CTIMs balance sheet strength, which AM Best categorizes as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect the lift the company receives from its parent, China Taiping Insurance Holdings Company Limited.
CTIMs risk-adjusted capitalization, as measured by Bests Capital Adequacy Ratio (BCAR), returned to the strongest level at year-end 2018 from the adequate level a year ago, after settling the majority of its claims and receiving most of its reinsurance recoverables for two major loss events “ Typhoon Hato and SJMs Grand Lisboa Palace fire “ in the second half of 2017. The company has demonstrated strong operating performance, with a five-year average return on equity of 18% from 2013 to 2017. Despite the major losses in 2017, the insurer turned a net operating profit due to investment income. CTIM maintains a leading position in Macaus non-life insurance market through a balanced distribution network of banks, agents, brokers and direct channels. The company also enjoys a wide range of support from its parent and affiliates in areas including brand recognition, reinsurance and investment, as well as financial support in times of need.
An offsetting rating factor is the companys geographic concentration in Macau, a small market that is prone to tropical storms. Due to its underwriting of large commercial accounts and moderate dependence on reinsurance, CTIM also is exposed to potentially elevated reinsurer credit and liquidity risks in the event of large losses, which could lead to volatility in its risk-adjusted capitalization. Nonetheless, these risks are mitigated by prudent underwriting and a highly rated reinsurer panel.
While positive rating actions are unlikely in the near term, negative rating actions could occur if there is a significant deterioration in the companys operating performance, a material decline in its risk-adjusted capitalization, or a substantial loss of its market share in Macau.
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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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