Moody’s Investors Service has placed the A3 insurance financial strength rating held by local firm Fidelidade Macau – Insurance Company Limited under review for downgrade due to the weakening credit profile of parent company Fosun.
On June 14, 2022, Moody’s placed under review to downgrade the Ba3 rating of the Fosun International Limited family of companies due to concerns that growing risk aversion among public bond market investors is putting pressure on liquidity. from Fosun.
Fidelidade Macau – which has been licensed to conduct insurance business in the Macau SAR since 1999 – is an indirect subsidiary of Fosun International Limited – the group responsible for distributing BioNTech vaccines in Macau through Fosun Pharma.
In 2014, Fosun paid €1 billion for an 85% stake in state-owned Caixa Seguros Saúde, Portugal’s largest insurance group, known by the brand name Fidelidade.
“The rating action on Fidelidade Macau primarily reflects Moody’s concern that contagion risks at Fidelidade Macau will increase as Fosun’s credit profile weakens. The risk of contagion, particularly via damage to reputation, could increasingly weigh on the growth of Fidelidade Macau’s activities. In addition, Moody’s considers contagion risks that Fosun could influence Fidelidade Macau’s risk appetite,” the rating agency warned.
“Given the weakening of Fosun’s credit profile, these contagion risks would persist despite the ring-fencing measures in place that protect Fidelidade Macau’s financial resources. These measures include an independent board of directors without control by Fosun, strict policies on related party transactions and strict regulatory oversight.
Still, Moody’s noted that Fidelidade Macau’s standalone credit profile remains strong, reflecting the insurer’s strong profitability and capitalization, as well as its cautious investment allocation.
However, these strengths would be offset by the insurer’s geographical concentration in the RAS of Macat and its moderate presence in the market, with its high debt leverage and low liquidity which continue to limit the insurer’s financial flexibility.
This month, S&P Global Rating issued Fosun International’s outlook maintained at ‘Stable’ and confirmed ‘BB’ on Fosun International’s issuer long-term credit rating and senior unsecured secured debt.
Fidelidade Macau insurance group ended 2021 with an overall profit of MOP 42.2 million ($5.2 million), a growth of 24% compared to the previous year.