HONG KONG--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of “a+” (Excellent) to Ping An Property & Casualty Insurance Company of China, Ltd. (Ping An P&C) (China). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Ping An P&C’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management.
Incorporated in 2002, Ping An P&C is the longest-standing member of Ping An Insurance (Group) Company of China, Ltd. (Ping An Group) and currently holds a nationwide license for non-life insurance business in mainland China. Ping An Group holds 99.5% of the company’s shares, and Ping An P&C has been the second-largest non-life insurer in China since 2009, with a market share of approximately 20% based on 2021 direct premium written. Ping An Group has expanded its scale and scope over the past couple of decades, establishing itself as one of the top global financial services and insurance conglomerates, offering integrated financial products and services, including life insurance, property/casualty insurance, asset management, trust, securities, banking, and other businesses.
Ping An P&C’s very strong balance sheet strength is supported by its risk-adjusted capitalisation assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s consolidated capital and surplus (C&S) grew by 12.4% from 2017 to 2021, supported by profitable underwriting experience and investment income, resulting in C&S of RMB 114.35 billion (USD 17.95 billion) as at year-end 2021. Additionally, the company has issued capital supplementary bonds in its domestic market, strengthening its regulatory solvency position and providing additional financial flexibility, while maintaining a low financial leverage ratio.
Furthermore, Ping An P&C’s investment portfolio is sizeable, diversified and overall liquid, with investment assets that amounted to RMB 352 billion as of year-end 2021. Bonds make up around one-third of the investment assets, followed by approximately a quarter of the portfolio from equity and equity funds. The share of unlisted assets including non-traditional financial products, such as asset management products and trusts exceed 10%, while inter-company investments stand at single-digit percentage. The majority of the underlying assets of non-traditional products comprise bonds and money market securities.
Ping An P&C delivered a five-year average return on equity of 18.6% from 2017 to 2021, during which the company consistently demonstrated better-than-average underwriting profitability, with an average combined ratio of 97.4%. Despite facing challenges from the motor comprehensive reform, the company has managed to maintain a higher-than-average profit margin in its key motor book of business. This success can be attributed to several factors, including favourable economies of scale, competitive edge in data-driven underwriting know-how, an extensive distribution network and an efficient claims infrastructure. Ping An P&C’s net investment yield has remained relatively stable, with an annualised net investment return (including capital gains and losses) of 5.1% during the same period.
Ping An P&C’s favourable business profile is underpinned by its strong brand recognition and very sizeable business portfolio diversified by distribution channels and geography. The company maintains a leading market share in most product lines it underwrites. Motor remains the largest line and accounted for roughly 70% of the overall gross premium written. While the underwriting portfolio mix has remained largely stable over the past five years, the company continues to adjust its product strategies to meet changing customer needs and macroeconomic trends. The proportion of business from accident and health and liability products rose as the company placed stronger focus on expanding non-motor business. In contrast, the company took the initiative to significantly scale down its credit and guarantee business in light of the worsened claims experience amid the COVID-19 pandemic in China. The company embraces the use of innovative technologies to enhance its capabilities in pricing, insurance services, customer development and operational efficiency.
The company is well-positioned at the current ratings. Negative rating actions could occur if the company’s balance sheet strength were to weaken significantly, for example, due to materially heightened underwriting leverage or investment exposure to risky assets. A sustained deteriorating trend in underwriting and operating performance also may result in negative rating actions.
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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