Fitch Ratings has revised the rating outlook of Sirius International Group, Ltd. to Negative from Stable, which the ratings agency says reflects operating performance deterioration in recent years.
At the same time, Fitch has affirmed Sirius International Group, Ltd.’s government, including its ‘BBB’ Long-Term Issuer Default Rating (IDR), ‘BBB-‘ senior debt rating and ‘A-‘ (Strong) Insurer Financial Strength (IFS) rating of Sirius’s operating subsidiaries.
The firm’s ratings continue to be supported by its established reinsurance business, strong capitalisation and reasonable financial leverage, which is somewhat offset by China Minsheng Investment Group Corp., Ltd.’s (CMIG) majority ownership, alongside its more moderate business profile, low fixed-charge coverage and reduced financial flexibility.
“Sirius’s recent operating results have been pressured and are inconsistent with both the company’s very strong historical performance and Fitch’s expectations for the rating. The company has not achieved underwriting profitability since 2016, driven by increased catastrophe losses and a declining benefit from favorable reserve development, including adverse development for the first nine months of 2019 (9M19),” explains Fitch.
In the third-quarter of 2019, Sirius reported a high combined ratio and reported an underwriting loss for the first nine months of the year, and Fitch expects the firm to record an underwriting loss for the full-year 2019.
The ratings agency adds that it continues to have concerns about unresolved debt and liquidity crisis at China Minsheng Investment Group, which owns approximately 86% of Sirius’ common shares. Fitch says that this could ultimately have negative implications to Sirius’s competitive market position over time.
