Hong Kong, July 13, 2015 -- Moody's Investors Service has assigned an A3 insurance financial strength
rating to Taikang Life Insurance Co., Ltd.
The rating outlook is stable.
This is the first time that Moody's has assigned a rating to Taikang Life.
RATINGS RATIONALE
"The A3 rating reflects Taikang Life's good market position and brand
recognition, diversified distribution channels and improving profitability,"
says Eric Yau, a Moody's Assistant Vice President and Analyst.
Taikang Life was the sixth-largest life insurer in China (Aa3 stable)
by total premium income in 2014. If premium from universal life
and unit-linked businesses were also included, the company
was the fifth-largest life insurer as of end-2014.
The company also runs an asset management business, and more recently,
has invested in retirement home projects.
Taikang Life has diversified distribution channels, which include
an agency force, bancassurance, telemarketing and the Internet,
which make the company less vulnerable to disruption to any one particular
channel.
Its profitability is strong and has shown an upward trend in recent years,
with return-on-capital rising to 17% in 2014 from
6% in 2011, amid favorable investment market performance.
While its solvency margin ratio was about 170% at end-2014
which was slightly lower than the 220%-300% reported
by other major life insurers, the company expects its solvency ratio
to be boosted to over 250% under the new solvency system to be
implemented in 2016.
However, these strengths are partly offset by the company's weak
agency productivity relative to other major life insurers, despite
improvement in recent years. The company may also experience volatility
in earnings and capital. Its exposure to high-risk assets,
which include equities, real estate and other high risk investments,
was high relative to its shareholders' equity at end-2014,
comparing with international peers. The extensive use of repo,
accounting for close to 15% of total liabilities at end-2014,
could introduce additional volatility to its balance sheet. The
company also plans to invest CNY 50 billion -- CNY 70 billion in
retirement home projects over the next 5-7 years, which require
capital and are subject to execution risk.
The stable outlook reflects Moody's expectation that the company will
continue to maintain its market position and profitability.
Moody's would consider upgrading Taikang Life's rating if there is:
(1) a significant reduction in its exposure to high-risk assets;
and/or (2) sustained improvement in profitability after pricing liberalization,
with diversified and balanced sources of earnings.
On the other hand, Taikang Life's rating could be downgraded if
there is: (1) a significant disruption to its current balanced distribution
strategy; (2) volatility in or significant reduction of profitability;
(3) increased capital needs and subdued profitability from its retirement
home projects; and/or (4) a reduction in its local solvency margin
ratio to below 150% under the new regulation (C-ROSS).
The principal methodology used in this rating was Global Life Insurers
published in August 2014. Please see the Credit Policy page on
www.moodys.com for a copy of this methodology.
Taikang Life Insurance Co., Ltd., incorporated
in Beijing, offers life insurance and reinsurance products in China.
At end-2014, its total assets and shareholders' equity were
CNY511 billion and CNY28 billion, respectively.
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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
The following information supplements Disclosure 10 ("Information
Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J)
of SEC Rule 17g-7") in the regulatory disclosures made at
the ratings tab on the issuer/entity page on www.moodys.com
for each credit rating:
Moody's was not paid for services other than determining a credit
rating in the most recently ended fiscal year by the person that paid
Moody's to determine this credit rating.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
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.
Eric Yau
Asst Vice President - 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
SUBSCRIBERS: (852) 3551-3077
Stephen Long
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (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
SUBSCRIBERS: (852) 3551-3077
Moody's assigns A3 rating to Taikang Life