Moody’s Investors Service has placed the A3 insurance financial strength rating held by the local Fidelidade Macau – Insurance Company Limited on review for downgrading due to the weakening credit profile of parent company Fosun.
On June 14, 2022 Moody’s placed on review for downgrade the Ba3 corporate family rating of Fosun International Limited due to concerns that public bond market investors’ increasing risk aversion will pressure Fosun’s liquidity.
Fidelidade Macau – which has been authorized to perform insurance businesses in the Macau SAR since 1999 – is an indirect subsidiary of Fosun International Limited – the group responsible for the distribution of BioNTech vaccines to Macau via Fosun Pharma.
In 2014 Fosun paid 1 billion euros for an 85 per cent share in state-owned Caixa Seguros Saúde, Portugal’s largest insurance group, known by the brand name Fidelidade.
‘The rating action on Fidelidade Macau mainly reflects Moody’s concern that contagion risks to Fidelidade Macau will increase as Fosun’s credit profile weakens. The contagion risk, particularly via reputational damage, could increasingly strain Fidelidade Macau’s business growth. In addition, Moody’s considers the contagion risks that Fosun might influence Fidelidade Macau’s risk appetite,’ the rating agency warned.
‘Given the weakening credit profile of Fosun, these contagion risks would linger despite the ringfencing measures in place that safeguard the financial resources at Fidelidade Macau. These measures include an independent board without control by Fosun, stringent related-party transaction policies and strong regulatory oversight.
Still, Moody’s noted that Fidelidade Macau’s standalone credit profile remains sound, reflecting the insurer’s strong underwriting profitability and capitalization, as well as its prudent investment allocation.
However, these strengths were said to be offset by the insurer’s geographic concentration in the Macat SAR and moderate market presence, with its high debt leverage and weak liquidity continue to constrain the insurer’s financial flexibility.
This month S&P Global Rating published maintained Fosun International outlook as “Stable”, and affirmed “BB” on Fosun International’s long-term issuer credit rating and its guaranteed senior unsecured debt.
Insurance group Fidelidade Macau ended 2021 with MOP42.2 million (US$5.2 million) in aggregate profit, representing a growth of 24 per cent when compared with the previous year.
