Fitch shifts state-linked Chinese insurers to negative outlook

Fitch Ratings has affirmed the ratings of seven Chinese insurers but revised the outlooks for six of these seven to negative. The ratings agency said that its rating actions followed Fitch’s revision of the outlook on China’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to negative from stable and affirmation of the IDR at ‘A+’. Fitch cut its outlook on China’s sovereign credit rating to negative on 10 April, citing risks to public finances as the economy faces increasing uncertainty in its shift to new growth models. This followed a similar move by Moody’s in December and comes as Beijing steps up efforts to spur a weak post-Covid recovery with fiscal and monetary support. “Fitch’s outlook revision reflects the more challenging situation in China’s public finance regarding the double whammy of decelerating growth and more debt,” said Gary Ng, Natixis Asia-Pacific senior economist, reported Reuters. “This does not mean that China will default any time soon, but it is possible to see credit polarisation in some LGFVs (local government financing vehicles), especially as provincial governments see weaker fiscal health,” he added. The rating actions on Chinese insurers are as follow: Affirmed China Export & Credit Insurance Corporation’s (SINOSURE) IFS rating at ‘A+’, and revised the outlook to negative from stable; Affirmed China Life Insurance Company Limited’s IFS rating at ‘A+’ with stable outlook; Affirmed China Taiping Insurance Group Ltd’s long-term IDR at ‘A’, and revised the outlook to negative from stable; Affirmed China Taiping Insurance Group (HK) Company Limited's long-term IDR at ‘A’, and revised the outlook to negative from stable; Affirmed China Taiping Insurance Holdings Company Limited’s long-term IDR at ‘A’, and revised the outlook to negative from stable; Affirmed Taiping Life Insurance Company Limited’s Insurer Financial Strength (IFS) rating at ‘A+’, and revised the outlook to negative from stable; Affirmed PICC Life Insurance Company Limited's IFS rating at ‘A+’, and revised the outlook to negative from stable. “The outlook on the six insurers is negative, mirroring the outlook on China’s sovereign rating, as these ratings incorporate government ownership support to different degrees. The negative outlook reflects a potential decline in the willingness and ability of the government to support insurers with weaker standalone credit quality, during times of financial stress,” said Fitch. “However, we expect China Life’s rating, which reflects its stronger standalone credit quality and no government ownership uplift, to be in a better position to withstand any adverse effects from deterioration in the sovereign’s credit profile, and thus we affirmed its ratings and outlook,” added the agency. Fitch’s assessments on investment and asset risk facing the insurers, which considers their sovereign investment concentration risks, are incorporated in their standalone credit quality. The agency said that its current investment and asset risk scores are well below the sovereign rating, reflecting the insurers’ sizeable exposure to equity-type risky investments. “Thus, a deterioration in the sovereign rating may not cause an immediate change to the scores,” said Fitch.

Fitch shifts state-linked Chinese insurers to negative outlook

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