Research Update:

China Taiping Insurance Holdings

Upgraded To 'BBB+' And Core
Subsidiaries To 'A' On Government
Support; Outlook Stable
Primary Credit Analyst:
Connie Wong, Singapore (65) 6239-6353; connie.wong@standardandpoors.com
Secondary Contacts:
Terry Sham, CFA, FRM, Hong Kong (852) 2533-3590; terry.sham@standardandpoors.com
Xiaohong Chen, Beijing (86) 10-6569-2925; xiaohong.chen@standardandpoors.com

Table Of Contents
Overview
Rating Action
Rationale
Outlook
Rating Score Snapshot
Related Criteria And Research
Ratings List

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 26, 2013 1

1196588 | 301048589

Research Update:

China Taiping Insurance Holdings Upgraded To

'BBB+' And Core Subsidiaries To 'A' On
Government Support; Outlook Stable
Overview
We now view the Hong Kong-based CTIH group as a government-related
entity, and assess the likelihood of timely and sufficient extraordinary
support from the Chinese government as "high."
We are therefore raising our long-term issuer credit rating on CTIH to
'BBB+' from 'BBB' and affirming the 'A-2' short-term rating.
We are also raising the local currency long-term insurer financial
strength and issuer credit ratings on CTIH's core subsidiaries to 'A'
from 'A-'.
The stable outlook reflects our view that CTIH's financial risk profile
will remain moderately strong over the next 24 months while the group
continues to grow. However, we also anticipate volatility in the
investment and bancassurance market, and for its reinsurance operations.

Rating Action
On Sept. 26, 2013, Standard & Poor's Ratings Services raised its long-term
issuer credit rating on China Taiping Insurance Holdings Co. Ltd. (CTIH) to
'BBB+' from 'BBB'. The outlook is stable. At the same time, we affirmed our
'A-2' short-term rating. We also raised the long-term Greater China regional
scale rating on CTIH to 'cnA+' from 'cnA' and the short-term rating to 'cnA-1'
from 'cnA-2'. CTIH is a Hong Kong-based insurer that operates predominantly in
China and Hong Kong.
We also raised the ratings on the following Hong Kong-based subsidiaries of
CTIH:
To
Taiping Reinsurance Co. Ltd. (TPRe)
China Taiping Insurance (HK) Co. Ltd. (CTPI (HK))
Insurer financial strength
Local currency
A/Stable/-Counterparty credit rating
Local currency
A/Stable/-Greater China regional scale
cnAA+/--

From

A-/Stable/-A-/Stable/-cnAA/--

In addition, we raised our issue rating on the senior unsecured notes that
CTIH's special purpose vehicles issued and CTIH guarantees to 'BBB+' from
'BBB'. Similarly, we raised the Greater China regional scale rating on these

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 26, 2013 2

1196588 | 301048589

Research Update: China Taiping Insurance Holdings Upgraded To 'BBB+' And Core Subsidiaries To 'A' On
Government Support; Outlook Stable

notes to 'cnA+' from 'cnA'.

Rationale
We raised the ratings because we now consider the CTIH group to be a
government-related entity. We expect the Chinese government to remain a
majority shareholder and maintain its influence on CTIH. We see a "high"
likelihood that the group will receive timely and sufficient extraordinary
support from the Chinese government as needed.
We have raised the group credit profile by one notch to 'a', given the
potential for government support. The rating on CTIH is two notches below the
group credit profile to reflect the insurer's structural subordination as a
holding company.
In accordance with our criteria for government-related entities, our view of a
"high" likelihood of extraordinary government support is based on our
assessment of CTIH group's following characteristics:
"Important" role to the Chinese government. CTIH is one of the few
insurance groups in which the central government owns a majority share.
The group maintains a meaningful market share in both life and nonlife
insurance segments in China. In addition, it plays a special role in
conducting insurance business overseas and serving the national strategy
of increasing the overseas presence of SOEs. We believe a credit stress
or default of CTIH could significantly weaken market confidence in the
central government's supervision capability and willingness to support
SOEs in general. This would have a negative impact on the Chinese
insurance sector and threaten overall financial stability.
"Very strong" linkage to the government. The Chinese government has
ultimate ownership of CTIH through China Taiping Insurance Group Ltd.
(TPG), which the Ministry of Finance 100% owns. The government has
influence over the appointment of CTIH's senior management and the
group's strategic direction. TPG intends to raise its shareholding in
CTIH to 68.96% from 53.27%, and inject its unlisted assets into the
company.
Our assessment of the group credit profile is based on an anchor of 'a-'. We
view the group's business risk profile as strong because of its good
competitive position, which is attributable to its geographical and business
diversity. We see intermediate risks, based on our overall industry and
country risk assessment, given that life and nonlife insurance businesses in
China account for most of its business.
The group's upper-adequate capital and earnings, strong financial flexibility,
and an intermediate risk position underpin its moderately strong financial
risk profile. We expect the group's total adjusted capital to stay slightly
above our target capital for upper-adequate level over the next two years,
based on our capital assessment. We consider the group's financial flexibility

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 26, 2013 3

1196588 | 301048589

Research Update: China Taiping Insurance Holdings Upgraded To 'BBB+' And Core Subsidiaries To 'A' On
Government Support; Outlook Stable

to be strong, reflecting its various funding channels stemming from its

listing status, debt issuance, bank loans, and reinsurance. The company has a
record of raising capital and debt over the years. We also expect debt
leverage to return to below 40% over the next two years, improving its
financial flexibility. Our assessment of an intermediate risk position
reflects the group's limited risks in foreign exchange and investment
concentration.
Our combined assessment of enterprise risk management and corporate governance
and management is neutral to the group credit profile. The group's enterprise
risk management is adequate, in our view, based on its evolving ERM
development. CTIH has been tightening its risk management controls and is
developing a more holistic approach toward risk management among its group
members. The group's management is satisfactory, in our opinion. Consistent
strategy over the years has translated into sustainable and continued growth,
with a satisfactory operating performance.
The group's liquidity is strong, in our view, reflecting its strong cash flow,
which is backed by high-quality and liquid assets.
The ratings on TPRe and CTPI (HK) reflect our view that these entities are
core subsidiaries of the group. We believe they are likely to benefit from the
high likelihood of support from the Chinese government via the group. Our
recognition of these entities' core status is based on their significant
profit contributions and the size of their capital relative to the wider
group. Also, the two entities share the group's strategy and are well
integrated in terms of resources. TPRe is focused on reinsurance while CTPI
(HK) underwrites property and casualty in Hong Kong.

Outlook
The stable outlook reflects our view of the CTIH group's potential government
support, its strong business risk profile, and its moderately strong financial
risk profile. The group credit profile is supported by CTIH's geographically
diversified businesses, satisfactory market positions in the China and Hong
Kong markets, and diversified business lines. In addition, the group has
upper-adequate capital and earnings and strong financial flexibility. At the
same time, we expect financial leverage to return and stay slightly below 40%,
which is our threshold for "neutral" financial leverage.
We may raise the rating if we believe CTIH's capital is going to improve to a
strong level, as measured by our capital model, while the business continues
to grow and diversify, supporting a more stable earnings stream.
However, we may lower the ratings if we consider potential government support
to CTIH reduces. Alternatively, we could downgrade CTIH if both its financial
and business risk profiles deteriorate, which we do not currently expect. The
financial risk profile could weaken if the group's consolidated capitalization
deteriorates substantially due to unexpected market movements or catastrophe

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 26, 2013 4

1196588 | 301048589

Research Update: China Taiping Insurance Holdings Upgraded To 'BBB+' And Core Subsidiaries To 'A' On
Government Support; Outlook Stable

losses, and if we expect the company's financial leverage to be consistently

above 40%. The business risk profile could weaken if unexpected events
threaten the group's reputation or operating performance, triggering its
competitive position to deteriorate.
The outlooks on TPRe and CTPHK are stable to reflect the group's outlook.

Rating Score Snapshot

China Taiping Insurance Holdings Co. Ltd.
Issuer Credit Rating
BBB+/Stable/A-2
GCP
a
BRP/FRP Anchor
aBusiness Risk Profile
IICRA
Competitive Position

Strong
Intermediate risk
Strong

Financial Risk Profile

Capital and Earnings
Risk Position
Financial Flexibility

Moderately strong
Upper adequate
Intermediate risk
Strong

Modifiers
ERM and Management
Enterprise Risk Management
Management and Governance
Comparative Analysis
Liquidity

0
0
Adequate
Satisfactory
0
Strong

Support
Group Support
Government Support

1
0
1

Related Criteria And Research

Insurers: Rating Methodology, May 7, 2013

Group Rating Methodology, May 7, 2013
Enterprise Risk Management, May 7, 2013
Methodology For Linking Short-Term And Long-Term Ratings For Corporate,
Insurance, And Sovereign Issuers, May 7, 2013
Methodology: Management And Governance Credit Factors For Corporate
Entities And Insurers, Nov. 13, 2012
Rating Government-Related Entities: Methodology And Assumptions, Dec. 9,
2010
Refined Methodology And Assumptions For Analyzing Insurer Capital

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 26, 2013 5

1196588 | 301048589

Research Update: China Taiping Insurance Holdings Upgraded To 'BBB+' And Core Subsidiaries To 'A' On
Government Support; Outlook Stable

Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010

Ratings List
Upgraded
To
China Taiping Insurance Holdings Co. Ltd.
Counterparty Credit Rating
BBB+/Stable/A-2
Greater China Regional Scale
cnA+/--/cnA-1
China Taiping Insurance (HK) Co. Ltd.
Taiping Reinsurance Co. Ltd.
Counterparty Credit Rating
Local Currency
Greater China Regional Scale
Financial Strength Rating
Local Currency

From
BBB/Stable/A-2
cnA/--/cnA-2

A/Stable/-cnAA+/--/--

A-/Stable/-cnAA/--/--

A/Stable/--

A-/Stable/--

CIIH (BVI) Ltd.

Senior Unsecured
Senior Unsecured

BBB+
cnA+

BBB
cnA

China Taiping Capital Ltd.

Senior Unsecured
Senior Unsecured

BBB+
cnA+

BBB
cnA

Complete ratings information is available to subscribers of RatingsDirect at

www.globalcreditportal.com and at www.spcapitaliq.com. All ratings affected by
this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left
column.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 26, 2013 6

1196588 | 301048589

Copyright 2013 by Standard & Poor's Financial Services LLC. All rights reserved.
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part
thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval
system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be
used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or
agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not
responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for
the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL
EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING
WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no
event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential
damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by
negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and
not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase,
hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to
update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment
and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does
not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be
reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain
regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P
Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any
damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective
activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established
policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P
reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites,
www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription) and www.spcapitaliq.com
(subscription) and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information
about our ratings fees is available at www.standardandpoors.com/usratingsfees.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 26, 2013 7

1196588 | 301048589