In a recent peer review conducted by Fitch Ratings, APAC non-life insurers with substantial international operations have demonstrated robust company profiles and commendable capitalisation, setting them apart from their peers in the US and EMEA.
Fitch Ratings has assigned a rating category of ‘Favorable’ to ‘Most Favorable’ to the company profiles of APAC non-life insurers, attributing this to their expansive franchises and a high degree of diversification both in terms of product offerings and geographical presence.
The company profiles have received a ‘aa’ rating category, with Suncorp standing out for securing the second position in Australia and New Zealand despite having the smallest scale.
The peer group has excelled in capitalization, boasting ‘Strong’ to ‘Extremely Strong’ Fitch Prism Model scores and regulatory solvency ratios aligning with the ‘A’ to ‘AAA’ categories in Fitch’s insurance criteria guidelines.
However, Suncorp’s Rating Watch Negative suggests a potential drop in its ‘Very Strong’ Fitch Prism Model score following the proposed sale of its banking subsidiary, impacting its capital base.
Despite this, most insurers within the group maintain regular access to debt markets and are well-acquainted with investors.
Profitability within the peer group is assessed as ‘Strong’ to ‘Very Strong,’ driven by underwriting performances supported by price increases. Challenges such as high claims inflation, rising reinsurance expenses, and catastrophe costs persist, but overall profitability has been boosted by increasing reinvestment yields.
Notably, TMNF and MSI faced challenges due to the Covid-19 Omicron variant in Japan in 2022, but improvements are expected following rule changes related to insurance payments linked to ‘deemed hospitalisations.’
While asset risks play a moderate role in the rating assessment of Japanese insurers TMNF and MSI, they have a lower influence on other companies in the peer group.
Japanese insurers have embraced riskier investments to enhance yields amid persistently low interest rates. Fitch Ratings, however, anticipates that their risky-asset ratios will remain commensurate with their current ratings.
