AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of a- of Peak Reinsurance Company Limited (Peak Re) (Hong Kong) and its subsidiary, Peak Reinsurance AG (Switzerland).
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Peak Reinsurance Company Limited (Peak Re) (Hong Kong) and its subsidiary, Peak Reinsurance AG (Switzerland). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Peak Re’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Peak Re continues to maintain robust risk-adjusted capitalization, underpinned by a strengthening trend in its capital and surplus, driven by capital injections from shareholders and full earnings retention over the past five years. Other factors supporting the company’s balance sheet strength include the controlled level of net underwriting leverage and an improvement in its overall investment risk profile, as well as strong liquidity. Peak Re has reported favorable operating results consistently over the past five years.
Although the company experienced net underwriting losses in 2017 and 2018, due to multiple major natural catastrophe events, the net impact to Peak Re’s underwriting results is in-line with the industry average. The impact to its capital and surplus also was low and under control, due to a comprehensive retrocession program. The company continues to operate with efficiency, as reflected in its stable and lower-than-average management expense ratio. Investment results have been favorable over the past five years, supported by a growing stream of interest and dividend income from debt and listed equity investments.
Peak Re’s business portfolio is diversified by product lines and geographies, with Asia-Pacific accounting for approximately 60% of the company’s premium revenue. While the business portfolio is primarily made up of non-life risks, the company plans to expand its life & health business further, particularly in the area of medical reimbursement.
Offsetting rating factors include the continued competitive rate environment; an increase in retrocession costs; the growing frequency of severe catastrophe events; and greater uncertainties in the capital market.
Positive rating actions are unlikely over the near term. Negative rating actions may occur if there is a material deterioration in the company’s risk-adjusted capitalization, or if there is a deteriorating trend in its operating results. A deterioration in the credit profile of Fosun International Holdings Ltd., Peak Re’s major shareholder, may also impose a negative impact on Peak Re’s ratings.
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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