Fitch revises outlook on Allianz’s China operation to negative

Fitch has revised its outlook on Allianz’s 50%-owned Chinese company to negative from stable because of pressure on its capitalisation and an insufficient capital buffer.

At the same time as downgrading its outlook on Allianz Jingdong General Insurance Company, Fitch affirmed its Insurer Financial Strength Rating at A.

Fitch said Allianz Jingdong’s capital strength weakened to “adequate” last year from “very strong” at the end of 2020. It explained that this followed rapid business growth and business-mix changes.

“The comprehensive solvency ratio under the China Risk-Oriented Solvency System fell to 198% in 2021, from 320% in 2020. We expect a planned capital injection by shareholders to provide some capital buffer for Allianz Jingdong’s business expansion in the coming two to three years, but it may still be inadequate for the current rating level without further injections,” said the ratings agency.

Fitch expects Allianz Jingdong’s underwriting performance to be tested in the coming two to three years by the insurer’s planned business expansion.

Fitch added that there are number of factors that could lead to a negative ratings downgrade for Allianz Jingdong. One is if there is a significant change in its shareholding structure that results in Allianz losing its controlling stake, which diminishes the German firms’ support for the subsidiary.