Peak Re has seen its insurance financial strength (IFSR) downgraded to Baa1 from A3 by Moody’s.
Moody’s has also downgraded the credit rating of Peak Re (BVI) Holding Limited to Baa3(hyb) from Baa2(hyb). These securities are irrevocable and unconditionally guaranteed by Peak Re. At the same time, Moody’s changed its outlook to negative from a revised outlook.
The company wrote in a statement announcing the downgrade: “The downgrading of Peak Re’s IFSR to Baa1 from A3 where the outlook has been changed to negative from the reviews under review follows Moody’s decision on 23 August 2022 to downgrade Peak Re’s corporate credit rating (CFR). majority shareholder, Fosun International Limited (B1 negative), to B1 from Ba3 and change the negative outlook from the reviewed shares.
It added: “The decline in Fosun’s CFR reflects the company’s financial weakness and the risk of raising capital amid financial pressures in the onshore and offshore markets. Fosun’s negative outlook reflects uncertainty over the company’s ability to sell assets and raise funds against short-term debt maturities in the coming months.” 12 coming up, and the ongoing challenges of balancing his financial needs and maintaining his business reputation.
Moody’s wrote that the situation on Peak Re mainly takes into account the increasing risks to Peak Re from Fosun’s weak credit history, mainly due to credit losses, which may affect the growth of Peak Re’s business and financial transformation including access to a large market.
It wrote: “These contagion risks may persist despite the security measures in place to protect Peak Re’s assets, including an independent board without majority control by Fosun, strict party-related policies and strong supervision. Moody’s action on Peak Re reflects the nature of the ratings.” appear to present contagion risks, given that Fosun’s rating has been downgraded to a hypothetical level. As a result, Moody’s sees governance risks under its environmental, social and governance (ESG) framework as the main driver of today’s performance, based on Peak Re’s ownership and Fosun and Fosun systems.”
It added: “The Baa1 IFSR on Peak Re includes one downgrade from the reinsurer a3 standalone portfolio, reflecting Peak Re’s exposure to spread risk from Fosun, which has a much smaller credit portfolio.”
The company said that Peak Re’s a3 standalone credit portfolio continues to reflect the reinsurer’s good franchise in the Asian reinsurance market, strong capitalization, expanding sales and product diversification, and a low-risk product mix. These strengths are offset by Peak Re’s lower profitability than its established peers around the world, although it has been slowly improving in recent years. In addition, the increase in Fosun’s high debt and financial weakness will continue to affect the financial stability of the borrower.
Moody’s said that an upgrade was not possible, due to negative views. However, it said this could change if Fosun’s outlook returns to normal, if the value of Peak Re and Fosun is sold, or if contagion risks from Fosun do not increase.
These latest announcements follow Moody’s placing the company’s IFSR for downgrade in June. The agency said at the time that it was concerned about contagion risks at Peak Re increasing as Fosun’s credit profile weakened.
The move followed a decision to downgrade the Ba3 company Fosun International Limited – which owns 87% of Peak Re’s shares – on June 14, 2022. Fosun’s rating was revised due to concerns that investors in the public markets. ‘ The increasing number of risks may put pressure on Fosun’s liquidity. Meanwhile, the risk of taking loans from Fosun’s major corporations is also increasing.