AM Best Affirms Credit Ratings of Peak Reinsurance Company Limited and Its Subsidiary

HONG KONG–(BUSINESS WIRE)–AM Best 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 categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Peak Re’s balance sheet strength is underpinned by its robust level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus reported a compounded average growth rate of 9.7% during the five-year period from 2015 to 2019, mainly attributable to capital injections from its shareholders and the full retention of earnings. The company also has demonstrated favourable financial flexibility. In October 2020, the company completed an issuance of perpetual subordinated guaranteed capital securities of USD 250 million. In addition, Peak Re in December 2018 launched Asia’s first sidecar, Lion Rock Re Ltd. (Lion Rock Re), to provide collateralized retrocession and enhanced underwriting capacity for the company. Peak Re has also renewed and upsized Lion Rock Re in 2019. Other supportive factors of the balance sheet strength include Peak Re’s prudent investment risk profile, the company’s financial agility in formulating a comprehensive retrocession program and its strong liquidity.

Peak Re has reported favourable operating results over the past five years, although the underwriting margin remains thin, partially due to intense market competition and losses arising from multiple catastrophes during the period. The company has a track record of strong operating efficiency, as reflected in its stable and lower-than-average management expense ratio. Investment returns from interest and dividend income also have contributed to the overall operating earnings.

The company underwrites a diversified non-life portfolio by product line and geography, with a focus on the Asia-Pacific region. With its life reinsurance business, the company focuses on broadening its revenue, in particular, medical reimbursement products, through active client engagement, product innovation and new channel strategies. The acquisition of Peak Capital Holdings Ltd. (formerly Lutece Holdings Ltd.) and its subsidiary Peak Capital Ltd. (formerly Lutece Investment Management Ltd.) also contributes to strengthen Peak Re’s franchise in the investment-linked securities (ILS) market.

Partially offsetting rating factors include the exposure to severe catastrophe events, upward pressure in retrocession costs and increased capital market volatility. Given the expanded balance sheet from the hybrid capital issuance, AM Best expects Peak Re will continue to uphold a prudent approach toward business expansion and maintain a robust level of risk-adjusted capitalization, while gradually refining its underwriting and investment portfolios to strengthen its operating performance over the short to intermediate term.

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.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

James Chan
Associate Director, Analytics
+852 2827 3418
james.chan@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Christie Lee
Senior Director, Analytics
+852 2827 3413
christie.lee@ambest.com

Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com