HONG KONG – (COMMERCIAL THREAD) –AM Best confirmed the financial strength rating of A- (excellent) and the long-term issuer credit rating of âa-â (excellent) of Ping An Health Insurance Company of China, Ltd. (Ping An Health) (China). The outlook for credit ratings is stable.
The ratings reflect the strength of Ping An Health’s balance sheet, which AM Best considers to be very strong, as well as its adequate operational performance, neutral business profile and appropriate management of business risks. The ratings also reflect the implicit and explicit support the company receives from its two major shareholders, Ping An Insurance (Group) Company of China, Ltd. (Ping An Group) and Discovery Limited, with respect to capital and financial support, business development, investment and risk management.
Ping An Health’s capital and surplus have continued to grow at a sustained rate in recent years, supported by capital injections and full profit retention. On July 22, 2021, the company announced its intention to raise further capital worth CNY 2.6 billion (US $ 402 million) from its shareholders, subject to regulatory approval. AM Best expects this capital increase to strengthen the company’s risk-adjusted capitalization, which continues to support Ping An Health’s rapid expansion in underwriting and asset risk in the short to medium term. , as measured by Best’s capital adequacy ratio (BCAR).
Ping An Health has consistently generated positive operating profit since 2017. The company’s net profit improved 47% to CNY 595 million in 2020, a combined result of favorable underwriting and investing performance during the year. Nevertheless, the technical margin has experienced a moderate downward trend in recent years due to increased competition in the market, in particular upward pressure on acquisition costs. AM Best will continue to monitor the underwriting performance of the company as it realizes its strategic advantages in terms of distribution capacity and efficiency. In contrast, investment performance remained stable, supported by an upward trend in interest and dividend income.
The company benefits from the favorable regulatory environment in the health insurance segment and from the high level of control over its distribution channels. Thus, AM Best expects a rapid and continuous expansion of the activities of Ping An Health in the short to medium term, although at a more moderate pace compared to previous years. Nevertheless, the company maintains a moderate level of product concentration in its underwriting portfolio. More than half of the total gross premiums written came from a single individual health product in recent years.
Negative rating actions could occur if Ping An Health’s risk-adjusted capitalization weakens such that it no longer supports the current assessment of balance sheet strength; for example, due to higher-than-expected underwriting or investment risks that deviate significantly from the company’s business plan. Negative rating actions could also occur if the level of support Ping An Health receives from Ping An Group is reduced or if the parent group’s credit fundamentals deteriorate significantly.
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