HONG KONG–(BUSINESS WIRE)–AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” (Excellent) to FuSure Reinsurance Company Limited (FuSure) (Hong Kong). The outlook assigned to these Credit Ratings (ratings) is stable.
FuSure is licensed as a general professional reinsurer and is headquartered in Hong Kong. With an initial capitalisation of HKD 1 billion (approximately USD 129 million), the company is 85.01% owned by Tencent Holdings Limited (Tencent), a technology conglomerate listed on the Hong Kong Stock Exchange, and 14.99% owned by Grand Azure Limited, a privately owned investment company.
The ratings reflect FuSure’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the implicit and explicit support from its ultimate parent, Tencent, including capital, business development, investment, risk management and operational support.
AM Best projects FuSure’s risk-adjusted capitalisation to be at the strongest level throughout the initial five-year business plan (2021-2025), as measured by Best’s Capital Adequacy Ratio (BCAR). The result is underpinned by expected capital support from its shareholders, prudent investment strategy and retrocession support. Notwithstanding, the relatively limited size of the initial capital and the projected fast-increasing underwriting leverage are offsetting factors to the company’s balance sheet strength.
As a start-up reinsurer, the company projects moderate net losses at the early stage of operation due to upfront expenses and expects to turn profitable toward the second half of its five-year business plan. Operating performance is exposed to elevated operational risk and execution risk; however, these risks are offset partially by the fact that the company has an experienced management team, as well as strategic and operational support received from its parent.
During the initial development phase, FuSure targets to build its underwriting book with a core focus on short-term health reinsurance in Greater China, while gradually diversifying into other product lines and other regions in the future. Although there is product concentration in the initial phase, the product risk of health insurance is viewed as moderate. FuSure expects to build its market presence in the initial stage by sourcing most of its premium revenue through its parent group’s established insurance client network.
FuSure receives rating enhancement from implicit and explicit support from its ultimate parent, Tencent. The company is viewed as a long-term strategic investment of Tencent, which has a sizable balance sheet, strong financial flexibility and favourable credit fundamentals. AM Best expects FuSure to benefit from the parent group in terms of effective use of innovation and technology, leading to competitive advantages in product design and pricing sophistication.
Positive rating actions could occur if the company can demonstrate successful execution of its business plan and further strengthen its balance sheet. Negative rating actions could occur if the company materially deviates from its business plan, including adverse deviation from its projections, a significant decline in risk-adjusted capitalisation and liquidity level, or the operating performance no longer supports the current rating level. Negative rating actions also could occur if there is a material decline in the level of support it receives from its ultimate parent, Tencent.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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