Taishan P&C’s efforts to improve underwriting boost

Increased investment in asset management products has slightly reduced liquidity.

China-based Taishan Property & Casualty Insurance’s (Taishan P&C) operating results are expected to improve in 2024-2025 due to better underwriting and stable investment yields.

The company's net loss decreased to $6.56m (CNY47.6m) in 2023 from $48.9m (CNY355m) in 2022, aided by a recovery in investment income, said Fitch Ratings.

The combined ratio remained around 110% in 2023. Whilst non-motor insurance, excluding agriculture, faces high expense ratios due to limited scale, efforts to tighten underwriting risk selection could improve the combined ratio.

Taishan P&C's investment portfolio is heavily weighted towards fixed-income instruments, including bonds and fixed-income-type investment funds. 

However, increased investment in asset management products has slightly reduced liquidity. The company's exposure to risky assets, mainly equity or hybrid-type mutual funds, remains manageable, with a risky-asset ratio of about 59% at the end of 2023.

Taishan P&C is rated one notch above its standalone credit quality due to its ownership by Shandong SASAC. 

This linkage provides a level of support, although the IFS Rating is not fully aligned with Fitch's assessment of Shandong province's creditworthiness. 

Shandong SASAC controls Taishan P&C through Shandong Hi-Speed Group, with ERGO Group AG holding a 24.9% stake. Shareholders are expected to continue providing capital support as needed.

Taishan P&C maintains robust capital to support premium growth and manage earnings volatility. 

The company's capital score, as per the Fitch Prism Global model, with a comprehensive solvency ratio of 302% at the end of Q1 2024, well above the 100% regulatory minimum.

Despite holding only 0.2% of China's non-life insurance market in 2023, Taishan P&C has 14 branches in northern and eastern China. Motor insurance is the primary business line, but other areas like agriculture and cargo transportation are growing steadily.

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