AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of China Taiping Insurance (Singapore) Pte. Ltd. (CTPIS) (Singapore). The outlook of these Credit Ratings (ratings) is stable. CTPIS is a wholly owned subsidiary of China Taiping Insurance Holdings Company Limited, which is ultimately majority owned by China Taiping Insurance Group Ltd. (TPG), a China state-owned financial and insurance group.
The ratings reflect CTPIS’ balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). In addition, CTPIS benefits from a rating enhancement that reflects its ownership by the TPG group.
CTPIS’ risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), declined to the strong level at year-end 2022; however, AM Best expects it to be sustained at the very strong to strongest level over the medium term. The company’s capital and surplus decreased by 48% to SGD 113 million (USD 84 million) as of year-end 2022, mainly due to unrealised losses on its investments. CTPIS received a capital injection from TPG group, in the first half of 2023, which considerably increased the capital and surplus. AM Best still expects capital injections and ongoing financial commitment from the TPG group to support CTPIS’ capital adequacy as it develops its life insurance operations over the medium term.
AM Best views the company’s operating performance as adequate with its non-life operations having generated robust profits over the past five years, although the company’s pre-tax operating income has been weakened by elevated start-up costs and technical provisions associated with initiating life insurance sales in 2018. Investment income has historically been a positive driver of CTPIS’ overall earnings; however, the company recorded a pre-tax loss in 2022 due to material unrealised losses suffered on its fixed-income portfolio. As of 30 June 2023, CTPIS has made a profit, mainly due to favourable investment performance and the underwriting profit generated from its non-life business. Whilst AM Best expects CTPIS to exhibit adequate operating performance over the medium term, potential volatility in both underwriting and investment results amid market uncertainties may dampen earnings over the near term.
AM Best views CTPIS’ business profile as neutral. The company is a medium size insurer in Singapore and has a long-established position within that country’s non-life segment. In addition, CTPIS has a developing profile in its domestic life segment, offering life insurance protection, savings and retirement planning products for high net worth and affluent individuals. Life insurance operations accounted for approximately 58% of gross written premium in 2022 and are expected to reduce over the medium term as the company shifts its focus from growth to value generation. The company benefits from its affiliation with the TPG group, which gives it a level of preferential access to insured risks associated with Chinese enterprises in the Singapore market.
AM Best considers CTPIS’ ERM approach to be appropriate given the size and complexity of its current operations. The company’s ERM framework and capabilities have benefited over a number of years from technical support and guidance provided by the TPG group. Nonetheless, AM Best views CTPIS’ developing life operations as presenting heightened execution risk over the medium term.
Despite CTPIS’ operations accounting for a relatively small portion of the TPG 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. CTPIS also benefits from 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.
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