AM Best Revises Outlooks to Positive for Ping An Health Insurance Company of China, Ltd.

AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Ping An Health Insurance Company of China, Ltd. (Ping An Health) (China).

The Credit Ratings (ratings) reflect Ping An Health’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The ratings also reflect the implicit and explicit support that Ping An Health receives from its two major shareholders, Ping An Insurance (Group) Company of China, Ltd. (Ping An Group) and Discovery Limited, with respect to capital and financial support, business development, investment and risk management.

The revision of outlooks to positive from stable reflects sustained improvement in Ping An Health’s operating results as it continues to focus on expanding the individual medical insurance business, led by its flagship product, E Sheng Bao (ESB). Amid its vigorous top-line expansion, the company has maintained double-digit return-on-equity ratio over the past five years, which outperforms the average of its domestic peers. Despite the deterioration in ESB’s loss ratio due to heightened market competition, the company has continuously delivered solid underwriting profit with better operating efficiency reflected by a declining operating expense ratio. The impact of market volatility on investment returns has been mitigated with Ping An Health’s higher allocation to fixed-income type assets. The company has demonstrated its superior underwriting ability and has delivered a steady investment income stream to support its bottom line.

Under IFRS 17, Ping An Health’s capital and surplus (C&S) amounted to CNY 8.61 billion (USD 1.22 billion) at year-end 2023. Despite increasing asset and underwriting risks, the company’s risk-adjusted capitalisation level is supported by steady growth of its C&S due to the combined result of the accumulation of net profit and rounds of capital injection from shareholders. Based on the company’s three-year business plan, AM Best expects that Ping An Health’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), will remain at the strongest level over the forecast period.

Ping An Health is the second-largest specialised health insurer in China in terms of gross premiums written. Leveraging its licensing advantage compared with domestic property and casualty insurers that are restricted to short-term products only, the company could underwrite both short- and long-term insurance health insurance products. The company leverages the strong agency network of its affiliate’s Ping An Life to generate sales. A key offsetting factor is its product concentration in ESB, which contributes to over half of the company’s top line. In recent years, the company also has developed innovative products such as sub-standard population coverage or chronic medicine coverage to diversify its product line and gain a first-mover advantage in the market.

Positive rating actions may occur if Ping An Health continues to deliver its planned top-line growth and profitability, and continues to outperform other specialised health insurers in terms of operating profitability.

Negative rating actions could occur if Ping An Health’s risk-adjusted capitalisation weakens such that it no longer supports the current balance sheet strength assessment, for example, due to higher-than-expected investment risks that materially deviate from the company’s risk appetite.

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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AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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