Ratings firm AM Best has affirmed the financial strength and long-term issuer credit ratings of the Hong Kong subsidiary of state-owned The People’s Insurance Company of China (PICC HK) as A- (excellent) and “a-,” respectively. The rating firm also regards the outlook of these credit ratings to be stable.
According to AM Best, the ratings reflect PICC HK’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile, and appropriate enterprise risk management (ERM). The ratings also reflect the lift that the company receives from its parent, The People’s Insurance Company (Group) of China Limited (PICC Group).
PICC HK is well-capitalized at the strongest level and the insurer’s capital and surplus position was strengthened in 2017, owing to a capital injection of HK$140 million (USD 17.9 million) from its two shareholders – PICC Group and Asia Insurance (Investments) Limited, which own 75% and 25% of PICC HK, respectively. The company maintains a liquid investment portfolio, approximately 90% of which is allocated to investment-grade bonds, as well as cash and cash equivalents.
The company has generated net profits consistently over the past five years, mainly through a solid stream of interest income. This income helped to offset underwriting losses in 2017 and 2018, which were mainly due to catastrophe losses and underwriting losses of the employees’ compensation line in its direct book of business.
Overall, PICC HK’s underwriting capacities have increased, supported by the recent capital injection, and its gross premiums grew notably by 46% in 2018. The company mainly underwrites commercial line business in its competitive domestic market, which has been subject to a prolonged soft pricing environment.
