Taikang Life to maintain strong market position, profitability

As of end-March, its comprehensive and core solvency ratios improved to 276% and 165%.

Moody’s Ratings said the China-based insurer, Taikang Life, will “maintain its strong market position and profitability, as well as a solid capital buffer and modest financial leverage over the next 12 to 18 months.”

By the end of March 2024, Taikang Life's comprehensive and core solvency ratios reached 276% and 165%, up from 212% and 106% in September 2023. 

This improvement is due to a $0.70b (RMB5b) perpetual capital bond issuance and reclassifying its fixed income holdings, leading to unrealized investment gains. 

The insurer is expected to sustain a solid capital buffer through strong internal capital generation.

In 2023, Taikang Life's premium income grew by 19%, surpassing the industry's 10% growth rate, and increasing its market share to 5.7% from 5.2% in 2022. 

This growth was driven by sales of long-term participating and traditional products with higher margins. The company's five-year average return on capital (ROC) remains above 20%, despite a 16% ROC in 2023 due to its expanded capital base.

However, the insurer's high exposure to risky assets and the low interest rate environment in China pose challenges. 

High-risk asset exposure is at 305% of shareholders' equity, but this is mitigated by increasing long-term fixed-income holdings and reducing equity and property sector exposure. 

Declining interest rates in China may also pressure profitability and capital positions through higher insurance reserve requirements and lower investment returns.

An upgrade could occur if high-risk assets/shareholders' equity remains below 300%, comprehensive and core solvency ratios stay above 250% and 150%, respectively, and ROC is above 12%, alongside the strong financial flexibility of Taikang Insurance Group. 

Conversely, a downgrade could happen if high-risk assets/shareholders' equity exceeds 400%, comprehensive and core solvency ratios fall below 150% and 100%, respectively, or ROC drops below 6%.

Taikang Life Insurance, the fourth-largest life insurer in China by direct premium income in 2023, offers life insurance and reinsurance products. 

As of 31 December 2023, its total assets were $210.62b (RMB1,504.4b) and shareholders' equity was $13.51b (RMB96.5b).

($1.00 = RMB7.27)