CHIC's solvency ratio falls below industry average in Q1 2024

CHIC is expected to slow premium growth in 2024.

Fitch Ratings pegged China Huanong Property & Casualty Insurance Company (CHIC) to have a negative outlook in the medium term, due to the ongoing challenges in improving these metrics and uncertainty surrounding capital raising, exacerbated by investment losses impacting earnings.

CHIC's risk-based capital metrics are expected to remain under pressure due to uncertainty over capital raising. 

The comprehensive solvency ratio dropped to 192% in the first quarter of 2024 (Q1 2024) from 212% at year-end 2023, below the industry average. 

CHIC is expected to slow premium growth and avoid significant asset risk increases in 2024 to maintain a solvency ratio above 180%, supporting its agriculture business.

CHIC's return on equity (ROE) decreased to 0.7% in 2023 from 1.3% in 2022, averaging 1.2% over 2021-2023,.

The decline is due to higher fair value losses on tradable assets and reduced investment returns. 

Profitability is expected to remain under pressure amidst volatile capital markets, though underwriting performance is stable. The combined ratio was 101% in 2023, up from 100% in 2022.

CHIC’s risky assets, including equity-type and non-investment-grade fixed-income investments, were 75% of shareholders' equity at the end of Q1 2024, up from 57% at the end of 2022. 

The business risk profile reflects rapid growth amid declining capital buffers, with health and accident insurance expanding rapidly in 2023. CHIC's market share remained stable at 0.3% in 2023.