AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” of TPRe and its wholly-owned subsidiary, TPRe China in a report published on 23 September. The stable outlooks reflect the expectations that the company's operating performance will maintain long-term profitability, supported by stable investment returns and underwriting performance. This is the ninth consecutive year that TPRe has been rated “A” by AM Best. On 11 October, AM Best published the credit report elaborating the rating rationale. The main viewpoints are summarized as follows:
Very Strong Balance Sheet Strength. First, TPRe risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level as of year-end 2021 and is expected to remain at the strongest level over the short to intermediate term. Second, the higher investment risk exposure is supported by the company’s bolstered capitalisation with the introduction of a strategic investor, Ageas Insurance International NV (Ageas). Third, TPRe manages its global catastrophe risk by arranging retrocession programmes that are aligned with its risk tolerance to protect its capital and surplus.
Adequate Operating Performance. First, TPRe’s return on equity (ROE) increased by 1.7pp from 2020 to 2021. TPRe projects its ROE will gradually return to the mid-single-digit level in three years. Second, Non-life net premium written (NPW) grew significantly in 2021, mainly driven by property reinsurance business. Third, TPRe’s investments have consistently yielded positive results. Net investment returns (including gains) were stable over the period of 2017 to 2021.
Neutral Business Profile. First, TPRe has established and maintained a leading position in the non-life reinsurance markets of Hong Kong and Macau. While maintaining its strong presence in the Greater China region, TPRe continues to expand to other Asian countries. Second, The company provides a variety of non-life and life reinsurance solutions, optimising the product mix of its life portfolio by reducing saving-type products and expanding protection lines of business.
Appropriate Enterprise Risk Management. First, TPRe’s risk management policies are well established and regularly reviewed to address risk governance and control procedures of key risk exposures. The reinsurer also closely monitors a suite of key risk indicators to ensure adherence to defined risk appetite and tolerance levels. Second, the company’s enterprise risk management capability is considered appropriate to support its risk profile.
Positive Shareholder Influence. First, AM Best believes that as the controlling shareholder, China Taiping Insurance Holdings Company Limited will continue to render strong capital and financial support to TPRe in a timely manner when necessary. TPRe has been well integrated into the wider group in terms of investment strategy, risk management and operational support. Second, the synergy with Ageas is expected to further improve TPRe’s governance and business expansion in target markets.
