Moody’s Investors Service has reviewed the downgrade of its A3 insurance financial rating held by the local Fidelidad Macau Insurance Company Limited due to the weakening of its parent company, Fosun’s credit profile.
On June 14, 2022, Moody’s considered downgrading Fosun International’s Ba3 corporate family rating due to concerns that increased risk aversion by investors in the public debt market would weigh on Fosun’s liquidity.
Fidelidade Macau, which has been licensed to operate insurance in Macau SAR since 1999, is an indirect subsidiary of Fosun International Limited, a group responsible for the distribution of BioNTech vaccines to Macau via Fosun Pharma.
In 2014, Fosun paid € 1 billion to an 85% stake in the state-owned Caixa Seguros Saúde, Portugal’s largest insurance group known under the brand name Fidelidade.
“The rating action of Fidelidad Macau primarily reflects Moody’s concern that the risk of transmission to Fidelidad Macau increases as the credit profile of Fosun weakens. Especially the risk of transmission due to reputational decline is Fidelidad. It could put an increasing burden on Macau’s business growth. In addition, Moody’s considers the risk of transmission that Fosun could affect the risk appetite of Fideridard Macau, “the rating agency warns. did.
Given the weakening of Fosun’s credit profile, these transmission risks will be protracted despite ring fencing measures to protect Fiderider de Macau’s financial resources. These measures include an independent board of directors without Fosun control, strict related party transaction policies, and strong regulatory oversight.
Nonetheless, Moody’s said Fidelid Macau’s independent credit profile remains sound, reflecting insurers’ strong underwriting profitability and capitalization, as well as prudent investment allocations.
However, these strengths are the financial flexibility of insurers due to their high debt leverage and low liquidity as insurers are geographically concentrated in Macat SAR and have a moderate market presence. It is said that it is still constrained.
This month, S & P Global Ratings confirmed Fosun International’s long-term issuer’s credit rating and its guaranteed preferred unsecured debt as “BB”, keeping Fosun International’s outlook “stable.”
Insurance group Fidelidade Macau ended in 2021 with a total profit of 42.2 million MOP (US $ 5.2 million), showing 24% growth compared to the previous year.