巴黎人娱乐城

巴黎人娱乐城 - Hong Kong - 01 Aug 2024: 巴黎人娱乐城 has downgraded China United Property Insurance Company Limited's (CUPI) Insurer Financial Strength (IFS) Rating to 'BBB+' from 'A-'. The Outlook is Stable. 巴黎人娱乐城 has removed the rating from Rating Watch Negative, on which it was placed in March 2024.

The rating downgrade reflects the removal of a one-notch uplift from CUPI's standalone credit quality due to linkage with its ultimate parent, state-owned China Orient Asset Management Co., Ltd. (COAM, BBB+/Stable), whose rating was downgraded by 巴黎人娱乐城 in June 2024 from 'A-'. CUPI's credit profile demonstrates its resilient underwriting performance, 'Favourable' company profile and 'Adequate' capital score measured by 巴黎人娱乐城 Prism Global model.

The Stable Outlook underscores 巴黎人娱乐城's expectation that CUPI will complete its capital supplementary bond issuance plan by end-2024, which will ease pressure on its narrowed capital buffer but raise the financial leverage ratio.

Key Rating Drivers

Financial Support from COAM Unlikely: CUPI's rating no longer incorporates uplift on account of COAM's ownership, considering the relative deterioration in the ultimate parent's credit profile. We expect COAM's capital buffer to remain modest in the near term, which will constrain its ability to undertake more policy-driven business relative to other national asset management companies. The downturn in China's property market and broader economy poses a persistent threat to COAM's asset quality and earnings.

Thin Capital Buffer to Improve: CUPI's Prism score remained at the lower end of the 'Adequate' level at end-June 2024. The thin buffer was due to increased 巴黎人娱乐城-defined risky assets, mainly fixed-income type alternative assets, which outpaced the subdued organic growth in capital. The comprehensive solvency ratio decreased to 190% by end-2Q24 from 196% at end-4Q23.

We expect the insurer's Prism score to stay 'Adequate' but with more capital buffer, after the completion of a capital supplementary bond issuance by end-2024. The pro forma financial leverage ratio at end-1H24 will be around 30%, up from 10% at end-1H24, which remains commensurate with the rating.

Investment Risk Selection Key: Credit risk remains key to our assessment of CUPI's investment risks. The insurer reported new non-performing investments in 1H24, mainly trust plans with underlying assets relating to the property sector. Asset-impairment losses amid rising counterparty risk and the Chinese property sector's diverging performance will continue to challenge the stability of its financial performance.

The insurer shifted more of its invested assets to asset management products, from traditional bonds and bond-type funds, by end-1H24. We believe the liquidity of such asset management products is essential to support insurance liabilities. 巴黎人娱乐城-defined risky assets were equivalent to 58% of shareholders' capital, compared with 69% at end-2023, as a result of decreased exposure to equity-type investments and a larger equity base.

Resilient Underwriting Profitability: The combined ratio was 96% in 1H24 (1H23: 94%), after averaging at 101% during 2021-2023. We believe that CUPI's underwriting performance remains susceptible to more frequent weather-related catastrophe claims, despite its consistent improvement in expense control. Return on equity (ROE) fell to 3.7% in 2023 on lower investment returns and capital market volatility, with a three-year average of 4.2%.

Sustained Agricultural Market Position: We assess CUPI's company profile as 'Favourable', reflecting its favourable operating scale, diversified business mix and geographical presence in China as well as 'Neutral' corporate governance profile, compared with that of other non-life insurers in the country. CUPI had a 4.1% share of the domestic non-life sector by premiums in 2023 and remained one of the leading agricultural insurance providers, accounting for nearly 12% of market direct premiums.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

- Prism score falling to below the 'Adequate' category for a sustained period;

- Financial leverage ratio consistently above 35%;

- Weakening in financial performance, such that the ROE is below 4% and the combined ratio is above 105% persistently.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

- Prism score improving to the 'Strong' level for a prolonged period;

- Stronger profitability, including the ROE above 6.5% and the combined ratio below 102%, on a consistent basis.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. 巴黎人娱乐城's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on 巴黎人娱乐城's ESG Relevance Scores, visit /topics/esg/products#esg-relevance-scores.

Additional information is available on

APPLICABLE MODELS

Numbers in parentheses accompanying applicable model(s) contain hyperlinks to criteria providing description of model(s).

• Prism Global (ex-U.S.) Model, v1.8.1 (1)

ADDITIONAL DISCLOSURES

• Dodd-Frank Rating Information Disclosure Form
• Solicitation Status
• Endorsement Policy

ENDORSEMENT STATUS