HONG KONG, June 13 (Bernama-BUSINESS WIRE)-- A.M. Best has affirmed the financial strength of A- (Excellent) and the issuer credit rating of “a-” of The People’s Insurance Company of China (Hong Kong), Limited (PICC HK) (Hong Kong). The outlook for each rating is stable.

The ratings reflect the company’s favorable risk-adjusted capitalization and the implicit and explicit support that it receives from its parent - The People’s Insurance Company (Group) of China Limited (PICC Group) - for business and capital support. The company is 75% owned by PICC Group and 25% owned by Asia Insurance (Investment) Ltd.

PICC HK’s book of business is mainly sourced from the whole account quota share (WAQS) program of its affiliate, PICC Property and Casualty Insurance Company Limited, which is the largest non-life insurance company in China. The WAQS-related business has provided a stable stream of premium and underwriting income to PICC HK since its inception in 2010.

Offsetting rating factors include unsatisfactory operating results arising from unfavorable investment returns, largely due to a single bond default and exchange rate losses from the Renminbi depreciation in 2015. The company has taken prompt remedial actions to improve its investment risk profile by downsizing its exposure to non-investment-grade bonds and equities. In addition, the company’s presence in Hong Kong’s non-life insurance market remains small.

Positive rating actions may occur if PICC HK can achieve substantial improvement in its risk-adjusted capitalization and market profile, while maintaining a favorable trend in operating performance. Conversely, negative rating actions could occur if PICC HK’s operating results continue to deteriorate and result in a material decline in risk-adjusted capitalization. A reduced level of support from the PICC Group, or deterioration in the PICC Group’s credit profile may also exert negative rating pressure.

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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