Hong Kong, January 29, 2019 -- Moody's Investors Service has affirmed the A1 insurance financial
strength rating (IFSR) of PICC Property and Casualty Company Limited (PICC
P&C).
The rating outlook is stable.
RATINGS RATIONALE
The affirmation of the A1 IFSR reflects the company's outstanding market
position in China's property and casualty (P&C) insurance sector,
huge underwriting capacity, solid capitalization and good profitability.
Compared with its domestic peers, the company has a higher portion
of premiums coming from non-motor insurance, which provides
better product diversification.
The company has increased its investments in the banking sector,
which add concentration risk and subject its capitalization and earnings
to higher volatility. In addition, PICC P&C has significant
catastrophe exposure to natural disasters, such as earthquakes and
typhoons, given that its business is mainly concentrated in China.
Nonetheless, the company maintains adequate reinsurance to mitigate
this risk to a manageable level, in terms of percentage of capital.
As the strongest subsidiary in the People's Insurance Company (Group)
of China Limited (PICC Group), PICC P&C may be called upon to
support other group affiliates for strategic purposes or capital needs
through direct investments or dividends upstream.
The rating outlook is stable, reflecting Moody's expectation
that the company will maintain (1) its strong position in China's P&C
market, and (2) a solid level of capitalization. Moody's
also expects the company to continue to maintain its good underwriting
profitability. In addition, we expect that the level of government
support should remain largely stable.
PICC P&C's rating also incorporates Moody's consideration of government
support, given the effective ownership of the Ministry of Finance
and the Social Security Fund, which is effectively an arm of the
Chinese government (A1 stable).
PICC P&C's status as the country's flagship P&C insurance company
and one of the major financial institutions underpins Moody's assumption
of a strong level of government support, in case of need.
The insurance industry has become increasingly important to the government,
on the back of initiatives to grow the industry and deem it as a means
to enhance social protection.
The dependence level is moderate, reflecting the company's exposure
to China's economic environment, while the link between the credit
profiles of PICC P&C and the government is only moderate.
However, given that PICC P&C's a1 Baseline Credit Assessment
(BCA) is already at the same level as China's sovereign rating,
Moody's has not incorporated any additional uplift in the final
IFSR of PICC P&C, given that the majority of its business is
in China and its key standalone credit fundamentals (asset quality,
capitalization, profitability and financial flexibility) are partly
correlated with and therefore linked to the economic and market conditions
in China, where it is domiciled, and has significant operations.
The rating is therefore at the same level as China's A1 sovereign rating.
RATING DRIVERS
The likelihood of an upgrade of PICC P&C's IFSR is limited because
the final rating is already at the same level as the sovereign rating,
and currently PICC P&C's business is predominantly in China.
However, the BCA could be raised if (1) the company's capital
adequacy improves further, with its Moody's-adjusted gross
underwriting leverage falling below 3x; and (2) its profitability
improves further, with the combined ratio consistently below 90%.
If the company's BCA is upgraded, and its overseas business
contributes a significant portion of the firm's revenue and earnings,
then the final rating could be upgraded.
On the other hand, PICC P&C's rating could be downgraded if
: (1) the company's capital adequacy deteriorates, with
its Moody's-adjusted gross underwriting leverage consistently above
5x; (2) its shareholders' equity erodes by more than 10%,
for example, from a major catastrophe or investment losses;
(3) the combined ratio consistently remains above 100%; and/or
(4) China's sovereign rating is downgraded, given the company's
significant business and asset exposure to the Chinese economy.
PRINCIPAL METHODOLOGY
The methodologies used in this rating were Property and Casualty Insurers
published in May 2018, and Government-Related Issuers published
in June 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
Headquartered in Beijing, PICC Property and Casualty Company Limited
(PICC P&C) is the largest P&C insurance company in China.
At 30 December 2018, the company was 69% owned by PICC Group,
which was in turn 60.84% owned by the Ministry of Finance
and 16.54% (including both A shares and H shares) owned
by the Social Security Fund of the People's Republic of China.
PICC P&C offers a wide range of insurance products, including
motor vehicle insurance, accidental injury and health insurance,
and agricultural insurance, etc..
The local market analyst for these ratings is Qian Zhu, +86
(21) 2057 4098.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
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Please see www.moodys.com for any updates on changes to
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for additional regulatory disclosures for each credit rating.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Kelvin Kwok
Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Yat Man Sally Yim
Associate Managing Director
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
