AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of 'a' of
The outlook of these Credit Ratings (ratings) is stable.
The ratings of TPRe reflect its balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also acknowledge the continued implicit and explicit support given by TPRe's parent company,
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TPRe's risk-adjusted capitalisation remained at the strongest level as of year-end 2019, as measured by Best's Capital Adequacy Ratio (BCAR). The capital and surplus has grown at an average rate of 15.1% per annum over the past five years, mainly driven by capital injections from CTIH and the partial retention of operating profits. Other supportive factors to its balance sheet strength include strong liquidity and prudent retrocession programmes.
TPRe has delivered consistently profitable operating earnings over the past five years, mainly attributed to positive underwriting results and favourable investment performance. The five-year average return on equity was 6.5% (2015-2019).
The ratings of TPRe China reflect its strategic importance to TPRe, as well as its high level of integration with, and the explicit support it receives from TPRe. The subsidiary has delivered robust non-life premium growth over the past five years, and had commenced assuming life reinsurance business in 2019. Going forward, AM Best expects TPRe China to remain a key contributor to TPRe's consolidated financials.
Offsetting rating factors include the diminishing underwriting margin in the non-life portfolio owing to natural catastrophe losses and the continued intense market competition, and the persistently low interest rate environment, which poses challenges to the asset and liability management of TPRe's fast growing life reinsurance book. The company's investment portfolio also is subject to some concentration risk from mutual funds and corporate bonds issued by financial institutions. Furthermore, fluctuations in foreign exchange have given rise to volatility in net profits over the past few years.
The company is well-positioned at the current rating level. Negative rating actions could occur if there is a material deteriorating trend in operating performance such that it no longer supports the current adequate assessment, or if there is a material decline in the company's risk-adjusted capitalisation. Negative rating actions also could occur if there is a material deterioration in CTIH's credit profile or if CTIH reduces the level of support it provides to TPRe.
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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