Reuters logo
Fitch Affirms Sunshine Insurance Group's Subsidiaries at IFS 'A'
March 6, 2017 / 3:56 AM / 9 months ago

Fitch Affirms Sunshine Insurance Group's Subsidiaries at IFS 'A'

(The following statement was released by the rating agency) HONG KONG, March 05 (Fitch) Fitch Ratings has affirmed the Insurer Financial Strength (IFS) ratings of China-based Sunshine Life Insurance Corporation Limited (SLI) and Sunshine Property & Casualty Insurance Company (SPCI) at 'A'. Fitch has also affirmed SLI's Long-Term Issuer Default Rating (IDR) at 'A-'. The Outlook on these ratings is Stable. A full list of rating actions can be found at the end of this commentary. KEY RATING DRIVERS The rating affirmation reflects the two company's consistently profitable operating results, steady business growth, and sound liquidity as well as their nationwide distribution coverage. The insurers' ratings, however, are constrained by a decline in capital buffer in 3Q16. Fitch views both SPCI and SLI are core subsidiaries within Sunshine Insurance Group Company Limited (SIG). Ongoing new business growth and an increase in exposure equity investments led to a reduction in SLI's regulatory solvency ratio, in terms of the China Risk Oriented Solvency System (C-ROSS), to 247% at end-3Q16, from 327% at end-2015. Ongoing surplus growth and the issue of subordinated notes enabled SPCI to sustain its regulatory solvency ratio at 266% at end-3Q16 (end-2015: 266%). SIG's risk-based capitalisation on a consolidated basis, as measured by Fitch's Prism Factor Based Model (FBM), declined to 'Adequate' category at end-3Q16, from 'Strong' at end-2015. Nonetheless, Fitch expects SIG to steadily improve its FBM capital score back to 'Strong' category through ongoing surplus generation and potential capital injection. SPCI continued to maintain stable underwriting profitability despite the launch of a trial deregulation in commercial motor insurance pricing in 2016. Motor insurance, which is the main business class in SPCI's insurance portfolio, has remained profitable. The company's combined ratio in 3Q16 amounted to 95% (2015: 95%). Persistent premium expansion has underpinned the growth of SLI's value of in-force business in 3Q16. SLI's annualised pre-tax operating return on assets in 3Q16 was 1.8%. SPCI cedes out business through various reinsurance treaties to support its underwriting capacity and to mitigate potential underwriting volatility from catastrophes. The insurer's risk retention ratio stood at about 97% in 3Q16. SPCI's catastrophe risk, in terms of net probable maximum loss, is at a manageable level relative to its capitalisation on a standalone basis. SLI's risky assets, which include stocks, equities, equity-related mutual funds and properties, stood at 211% of shareholders' equity at end-3Q16. SLI is also exposed to concentration risk associated with a single investment. Fitch expects that SLI will lower its risky asset exposure to a manageable level relative to its capitalisation as the company's insurance portfolio continues to expand. The rating of SPCI is underpinned by its nationwide distribution capability and its track record of operating history in China. SPCI is the seventh-largest non-life insurer, capturing about 3% market share. SLI's market share was 1.7% in terms of direct premiums written in 9M16. RATING SENSITIVITIES Downgrade rating triggers include: - weakening in SIG's consolidated capital score, as measured by Fitch's Prism Factor Based Model (FBM), below 'Strong' category for a prolonged period; - sustained deterioration in SIG's operating profitability with SPCI's combined ratio persistently above 103%; - material increase in SPCI's net of reinsurance catastrophe risk relative to its capitalisation; or - an escalation in SIG's financial leverage to higher than 35% for a prolonged period. Given SIG's existing credit fundamentals, an upgrade of SLI and SPCI's ratings is unlikely in the near term. Upgrade triggers over the medium- to long-term include: - SIG keeping its Prism FBM capital score at the 'Strong' category or above and lowering its consolidated financial leverage to less than 20%; - SPCI maintaining favourable operating results, with a combined ratio consistently below 95%; and - SLI sustaining its favourable growth in value-of-in-force business and new business value. FULL LIST OF RATING ACTIONS SPCI - IFS Rating affirmed at 'A'; Outlook Stable SLI - IFS Rating affirmed at 'A'; Outlook Stable - IDR affirmed at 'A-'; Outlook Stable - USD500m 2.5% senior unsecured notes due 2019 affirmed at 'A-' - USD700m 3.15% senior unsecured notes due 2021 affirmed at 'A-' - USD300m 4.5% senior unsecured notes due 2026 affirmed at 'A-' Contacts: Primary Analyst Terrence Wong Director +852 2263 9920 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road, Central, Hong Kong Secondary Analyst Jeffrey Liew Senior Director +852 2263 9939 Committee Chairperson Siew Wai Wan Senior Director +65 6796 7217 Applicable criteria, "Insurance Rating Methodology", dated 15 September 2016, are available on www.fitchratings.com Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020072 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below