(The following statement was released by the rating agency)
Nov 08 - Fitch Ratings has assigned China Taiping Insurance Holdings Company Limited’s (CTIH, ‘BBB+') upcoming senior unsecured notes due 2022 an expected ‘BBB(EXP)’ rating. At the same time, the agency has affirmed CTIH’s Issuer Default Rating at ‘BBB+’ with Stable Outlook. A full rating breakdown is provided below.
The notes will be issued by China Taiping Capital Limited and unconditionally and irrevocably guaranteed by CTIH. The notes are notched a level below CTIH’s rating to reflect below-average recovery prospects of senior debt held at a holding company. The final rating is contingent on the receipt of final documents conforming to information already received.
The proceeds will primarily be used to repay CTIH’s USD175m senior unsecured debt maturing on 12 November 2013 (issued through CIIH (BVI) Ltd. ) and for general corporate purposes.
Ongoing surplus growth lowered CTIH’s financial leverage to 37.1% at end-H112 from 39.6% at FYE11. Interest coverage (excluding realised and unrealised gains and losses) stood at 9.8x for H112. While CTIH’s financial leverage will escalate above 40% with the issue of senior notes, it will likely fall below 40% once the abovementioned debt has been repaid.
The issue rating is subject to the same considerations that might affect CTIH’s Long Term IDR. Negative rating triggers for CTIH include a consistently high financial leverage above 40% even after the repayment of debt and loan in 2013, low interest coverage below 4x on a consolidated basis or adverse change in its operating entities’ standalone key credit factors.
Negative triggers for subsidiary Tai Ping Life Insurance Co Ltd include a decline in its regulatory solvency ratio below 150% (end-of-H112: 169%) on a sustained basis and, for another subsidiary Taiping Reinsurance Company Limited, a combined ratio consistently exceeding 100% (H112: 105%) or a dramatic increase in after-reinsurance natural catastrophe exposures. In view of high financial leverage and only adequate capitalisation, Fitch sees little prospect of CTIH and its operating entities being upgraded in the near term.
IDR affirmed at ‘BBB+'; Outlook Stable
Senior unsecured notes issued through CIIH (BVI) Ltd affirmed at ‘BBB’
Senior unsecured notes due 2022 issued through China Taiping Capital Limited assigned ‘BBB(EXP)’
Tai Ping Life Insurance Co Ltd
Insurer Financial Strength Rating affirmed at ‘A-'; Outlook Stable
Taiping Reinsurance Company Limited
Insurer Financial Strength Rating affirmed at ‘A’; Outlook Stable