November 27, 2017 / 2:46 AM / a year ago

Fitch Affirms Yingda Taihe Property Insurance at 'A-'/Stable

(The following statement was released by the rating agency) HONG KONG, November 26 (Fitch) Fitch Ratings has affirmed China-based Yingda Taihe Property Insurance Co. Ltd.'s (YDPIC) Insurer Financial Strength Rating of 'A-' (Strong). The Outlook is Stable. KEY RATING DRIVERS The affirmation reflects the insurer's strong operating profitability and its 99.4% ownership by State Grid Corporation of China (SGCC, A+/Stable), a state-owned electricity utility corporation. This linkage provides YDPIC with a one-notch uplift above its standalone assessment. SGCC owns the insurer through a portfolio of fully or majority-owned subsidiaries, including Yingda International Holdings Group Limited. Fitch expects YDPIC to continue sourcing a large portion of its quality business through its parent, SGCC. The underwriting results of its property business originating from SGCC have remained strong with stable growth. YDPIC faces less pressure than its peers from the deregulation of commercial motor insurance as the insurer has focused on selling the product to individuals and for vehicles associated with its parents. This strengthened YDPIC's ability to control its expense ratio and underpinned its overall underwriting profitability. YDPIC's combined ratio was 89% in 1H17 based on unaudited financial statements (2016: 99%, 2015: 101%). Capitalisation was good as YDPIC expanded its insurance portfolio despite ongoing surplus generation. The company reported a China Risk Oriented Solvency System (C-ROSS) comprehensive solvency ratio of 152% at end-3Q17, above the 100% regulatory preferred benchmark but at the lower end compared with peers, partially due to a higher capital charge for its large property business exposure. YDPIC's capital score, as measured under Fitch's Prism Factor Based Capital Model, remained 'Adequate' at end-1H17. YDPIC plans to issue capital supplementary debt in 1H18 to replenish its solvency ratio, subject to regulator's approval. YDPIC depends on reinsurance to strengthen its underwriting capacity and mitigate underwriting volatility. Its risk retention ratio was about 83% in 1H17. The company increased the protection limits of its non-marine catastrophe excess-of-loss reinsurance treaty in 2017 to manage its catastrophe risk exposure. Founded in 2008, YDPIC had total gross premiums of CNY8.3 billion in 2016, giving it a market share of 0.9% and a ranking of 13th largest in China's non-life insurance market. RATING SENSITIVITIES Downgrade rating triggers include: - a dramatic change in the shareholding structure, with SGCC losing its controlling stake in YDPIC; - a deterioration in YDPIC's capital buffer, with the company's capital score based on Fitch's Prism Factor Based Capital Model falling below 'Adequate' on a sustained basis; - a sustained decline in YDPIC's underwriting margin, with a combined ratio higher than 105%; or - an increase in the insurer's catastrophe exposure due to inadequate reinsurance protection. Upgrade rating triggers include YDPIC's ability to: - improve its Prism Factor Based Capital Model score to 'Strong' or higher on a sustained basis; - strengthen its underwriting stability, with a combined ratio persistently below 95%, and - broaden its distribution coverage. Contact: Primary Analyst Mia Yang Analyst +852 2263 9959 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central Hong Kong Secondary Analyst Terrence Wong Director +852 2263 9920 Committee Chairperson Jeffrey Liew Senior Director +852 2263 9939 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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