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S&P affirms China Taiping Insurance ratings, lowers group credit profile

S&P Global Ratings affirmed China Taiping Insurance Holdings Co. Ltd.'s ratings despite lowering the group's credit profile on the back of heightened exposure and sensitivity to market risks and credit risks.

The agency affirmed the long-term and short-term issuer credit ratings of China Taiping Insurance and parent China Taiping Insurance Group (HK) Co. Ltd. at BBB+ and A-2, respectively. At the same time, it lowered the credit profile of the group, before considering government support, to "bbb+" from "a-."

S&P said May 31 that the downgrade reflects its expectations that the group's capital and earnings will continue to weaken in the next two years due to expansion in its insurance and financial leasing businesses. Taiping & Sinopec Financial Leasing Co. Ltd., the group's financial leasing joint venture, is expected to remain capital consumptive due to its strong growth momentum, resulting in heightened volatility in the group's earnings.

However, S&P added that the group will continue to benefit from its strong competitive positions in China and Hong Kong and from the high likelihood of extraordinary government support.

The rating agency further affirmed the long-term and short-term Greater China regional scale ratings of the two holding companies at "cnA+" and "cnA-1," respectively.

S&P also affirmed the A long-term local currency issuer credit rating and the "cnAA+" long-term Greater China regional scale rating of the group's core units Taiping General Insurance Co. Ltd., China Taiping Insurance (HK) Co. Ltd. and Taiping Reinsurance Co. Ltd.

The outlooks on all the ratings are stable.

S&P could lower the ratings if the group's unsupported credit profile further weakens to "bbb" from "bbb+," or if liquidity at the holding companies deteriorates significantly. S&P does not expect to raise the ratings in the next two years, but may do so if the group is able to significantly improve its operating performance and capitalization, while lowering sensitivities toward investment risk.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.