Fitch Ratings said that Huatai Property & Casualty Insurance’s (Huatai P&C) combined operating ratio (COR) for the first months of 2024 improved to 94.7%, compared to 102.3% in 2023.
The ratings agency on Thursday (6 March 2025) affirmed the Insurer Financial Strength (IFS) Rating for China-based Huatai P&C at ‘A+’ (Strong), with a Stable Outlook.
The insurer is considered ‘Very Important’ to its parent, Chubb Limited, which owns 85.5% of Huatai Insurance Group Company Limited. This importance is reflected in the one-notch uplift in Huatai P&C’s IFS Rating, with expectations of operational and financial support from Chubb if needed.
Huatai P&C’s improved financial performance in 2024 was driven by better underwriting results, as indicated by a lower expense ratio and stable claim ratio. Fitch expects the company’s underwriting performance to benefit from Chubb’s disciplined underwriting control and actuarial support.
The insurer reported stable financial performance in 2024, with an annualised return on equity (ROE) of 7.1% for the first nine months of the year, compared to 7.0% in 2023. Despite this stability, the insurer’s profitability remains vulnerable to fluctuations in investment returns due to its exposure to equity markets and alternative assets.
Huatai P&C ceded 40% of its premiums written in the first nine months of 2024 through various reinsurance treaties with reinsurers of sound credit quality. A slight decrease in the cession ratio is expected in 2025 due to reduced reinsurance use in the motor business. “Even so, we believe Huatai P&C will consistently rely on reinsurance to mitigate catastrophe risk exposure and support underwriting capacity in light of the magnitude of the company’s capital base,” Fitch said.
Huatai P&C has moderate exposure to risky assets, including stocks, equity-type funds, long-term equity investments, and non-investment-grade fixed-income investments. The risky-asset ratio at the end of the third quarter of 2024 remained consistent with its IFS Rating. The company has invested in fixed-income-type non-standard assets to enhance its yield, which Fitch considers less transparent and liquid than bonds.
Huatai P&C’s capital score under the Fitch Prism Global model was well into the ‘Strong’ category by the end of the third quarter of 2024, compared to the lower end of the ‘Strong’ category at the end of 2023. The increase in retained earnings supported the enhanced capital buffer. The regulatory comprehensive solvency ratio stood at 234% by the end of the third quarter of 2024, exceeding the 100% regulatory minimum. The insurer has no financial debt.
Huatai P&C has been operating in China’s property and casualty insurance market for over two decades, with gross premiums exceeding CNY10bn in 2023. Fitch views Huatai P&C’s company profile as ‘Moderate’ compared to other Chinese non-life insurers, based on its operating scale and ‘Neutral’ corporate governance.
