China Taiping Insurance Holdings Co.

Ltd.
Primary Credit Analyst:
Connie Wong, Singapore (65) 6239-6353; connie_wong@standardandpoors.com
Secondary Contact:
Austin Oh, Hong Kong (852) 2533-3508; austin_oh@standardandpoors.com

Table Of Contents
Major Rating Factors
Rationale
Outlook
Related Criteria And Research

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China Taiping Insurance Holdings Co. Ltd.

Major Rating Factors
Strengths:
Diverse business profile with operations in Hong Kong and China
Strong long-term growth prospects in China, albeit with higher industry risk
Adequate earnings

Counterparty Credit Rating

BBB-/Stable/A-3
Greater China Regional Scale
cnA-/--/cnA-2

Weaknesses:
Capital drain from growing China operations

Rationale
The rating on China Taiping Insurance Holdings Co. Ltd. (CTIH) reflects the combined credit profiles of the China
Taiping Insurance group's major operating entities and subordination notching due to CTIH's status as an insurance
holding company. CTIH's diverse business profile in China and Hong Kong, its strong long-term growth prospects in
China, and its adequate capitalization and earnings capability support the rating. The company's capital needs due to
the continuing strong growth of its China subsidiaries moderate these strengths.
The diversity in the China Taiping Insurance group's businesses supports CTIH's business profile. In Hong Kong, CTIH
has a wholly owned reinsurance operation, Taiping Reinsurance Co. Ltd. (TPRe; local currency A-/Stable/--;
cnAA/--), and a property and casualty (P&C) operation, China Taiping Insurance (HK) Co. Ltd. (CTI HK; local
currency A-/Stable/--; cnAA/--). The group also has two partially owned companies in China: a life insurance
company, Taiping Life Insurance Co. Ltd. (TPL; not rated) and a P&C insurance company, Taiping General Insurance
Co. Ltd. (TPI; not rated).
In our view, growth potential for CTIH in China remains strong due to the underpenetrated market and the company's
strong distribution network. However, we expect growth to slow down in 2013 following regulatory changes over sale
of bancassurance products and China's slower economic growth. Given the management's strategic focus, we
anticipate that the group's business in China will become increasingly important in terms of asset size and earnings.
We view China's regulatory environment and capital markets as less developed than in Hong Kong, exposing CTIH to
higher industry risk. Nevertheless, we believe the company's strong management capabilities and market knowledge
temper these risks.
We expect the mature subsidiaries of the China Taiping Insurance group, TPRe and CTI HK, to support the group's
earnings over the next 12 months. TPRe's profit is likely to rebound in 2013 after a decline in 2012 due to catastrophe
losses. A likely increase in premium rates will support the turnaround. We anticipate that the group's profitability to be
satisfactory in 2013. This is despite a slowdown in top line growth in the past 12 months, reflecting the slower growth
in operations in China. Annualized return on assets for the first half of 2012 was about 1%. The group's profit after tax
for the first half of 2012 was Hong Kong dollar (HK$) 983 million compared with HK$1,118 million for the first half of
2011.

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China Taiping Insurance Holdings Co. Ltd.

We expect the TPL management's continued focus on developing regular premium products to support the company's
profitability. These products generally have higher margins than single-premium products. TPL's regular premium
products accounted about 70% of the group's total premiums in 2012. TPL's margin for new business rose to 13.4% in
the first half of 2012, from 12.03% in the corresponding period in 2011, despite regulatory control over bancassurance
since 2011. The company has a market share of about 3.5% in China, with the majority of premiums being regular.
Premiums from China accounted for about 75% of the company's total gross premium in the first half of 2012. TPL has
tried to move away from single-premium products in recent years. Its share of business from bancassurance fell to
57.6% as of June 30, 2012, from 61.3% a year earlier.
TPI's underwriting performance has improved, with its combined operating ratio for the nonlife business dropping to
98% for the first six months of 2012, from 99% in 2011. The company still predominately writes motor insurance
(about 76% of total premium), which is a very competitive class in China.
We consider the China Taiping Insurance group's capitalization to be adequate based on our risk-based capital
analysis. The slowdown in TPL's growth in 2011 and 2012 helped CTIH alleviate capital pressure due to earlier rapid
growth of the China operations. Nevertheless, CTIH's capital strength may be strained if the group's profitability
deteriorates significantly or its top line growth picks up again without a corresponding increase in internal capital
generation. CTIH's debt leverage increased to about 42% in 2012 from 39.3% in 2011 following a new debt issuance.
The company's debt leverage is still acceptable for the rating. We expect the debt leverage to fall to less than 40% in
2013.

Outlook
The stable outlook reflects our expectation that CTIH will maintain its strong and diverse business position, and
satisfactory financial profile while supporting its growing China operations.
We could raise the rating on CTIH if the group's capitalization improves and its operating entities maintain good
earnings. We may lower the rating on CTIH if the group's consolidated operating performance again deteriorates
significantly, lowering the group's capitalization.

Related Criteria And Research

Group Rating Methodology And Assumptions, Nov. 9, 2011
Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using The Risk-Based Insurance
Capital Model, June 7 2010
Holding Company Analysis, June 11, 2009
Interactive Ratings Methodology, April 22, 2009
China Taiping Insurance Holdings Co. Ltd. -- Business Statistics (Consolidated)
--Year ended Dec. 31-(Mil. HK$)
Total gross premium

2012*

2011

2010

2009

2008

2007

31,489.1

50,098.0

48,759.3

31,022.7

15,232.3

17,934.0

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China Taiping Insurance Holdings Co. Ltd.

China Taiping Insurance Holdings Co. Ltd. -- Business Statistics (Consolidated) (cont.)
Life insurance premiums

23,734.7

38,137.2

37,218.1

21,914.0

21,214.9

16,245.2

Gross reinsurance premiums

2,127.6

3,431.1

2,649.7

1,775.0

1,839.0

1,681.2

Gross non-life premiums

5,073.3

7,930.2

8,866.0

7,333.8

1,949.9

N/A

Operating expenses

7,128.2

12,507.6

12,242.9

10,286.6

7,231.8

9,434.1

16,181.2

27,158.7

27,543.8

12,252.4

2,708.1

11,849.5

Change in insurance reserve

Finance costs

290.5

565.5

353.3

318.0

183.4

148.5

1,175.1

892.1

2,860.2

1,480.4

(594.9)

3,010.9

983.4

919.9

2,653.5

1,187.6

(562.4)

2,457.2

Total assets

222,387.1

191,372.3

154,483.7

111,531.0

88,017.1

55,617.5

Total liabilities

202,724.3

174,498.3

136,001.8

96,193.2

75,866.5

47,521.9

Total equity

19,662.8

16,874.0

18,481.9

15,337.8

12,150.5

8,095.7

Total debt

10,985.3

11,040.7

10,231.1

5,725.1

5,376.0

2,960.4

8.8

8.8

12.0

13.8

13.8

14.6

Profit before tax

Profit after tax

Equity/Total assets (%)

Debt leverage (%)

35.8

39.3

35.6

27.2

30.7

26.8

Return on average assets (%)**

1.0

0.5

2.0

1.2

(0.8)

0.0

Retrun on equity (%)

5.0

5.5

14.4

7.7

(4.6)

30.4

*For six months ended June 30. Restated. Interest-bearing notes. **Annualised figure for 2012. HK$--Hong Kong dollar.

Ratings Detail (As Of January 25, 2013)

China Taiping Insurance Holdings Co. Ltd.
Counterparty Credit Rating
Greater China Regional Scale

BBB-/Stable/A-3
cnA-/--/cnA-2

Senior Unsecured
Greater China Regional Scale

cnA-

Senior Unsecured

BBB-

Counterparty Credit Ratings History

03-Jun-2009

BBB-/Stable/A-3

19-Mar-2009

BBB-/Watch Neg/A-3

24-Oct-2003

BBB-/Stable/A-3

29-Apr-2011

Greater China Regional Scale

28-Apr-2011

cnA-/--/cnA-2
cnA-/Stable/cnA-2

*Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable
across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country.

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