Equity infusion strengthens Zhongyuan against risks: Fitch Ratings

Despite higher loss ratios in agricultural insurance, ZYIC maintains a profitable underwriting margin.

Fitch Ratings expects Zhongyuan Insurance Company (ZYIC) to maintain 'strong' capital strength, supported by an equity capital infusion from shareholders. This capital infusion, totalling about CNY2.3 billion in 2023, enhances ZYIC's capacity to withstand catastrophe risk and supports its rapid premium growth.

ZYIC benefits from a one-notch uplift in its Insurer Financial Strength (IFS) Rating due to its ownership linkage with the Henan provincial government.

The government's majority controlling stake in ZYIC ensures consistent support for the insurer's strategic expansion plans and financial needs.

With a focus on the agricultural sector, ZYIC holds a moderate operating scale and has demonstrated profitable underwriting performance.

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Despite higher loss ratios in agricultural insurance, ZYIC maintains a profitable underwriting margin. The company's combined ratio stayed favourable at about 94.6% in 2023, supported by strong premium growth and improved cost control.

ZYIC faces catastrophe risk due to its focus on the agricultural insurance market, which can lead to significant insurance losses during extreme weather or natural disasters. However, the company actively manages its catastrophe exposure through risk prevention measures and reinsurance arrangements.

The agricultural insurer also adopts a prudent approach in managing its invested assets, focusing on safety and stability. Risky assets represent a tolerable portion of shareholders' equity, enabling ZYIC to maintain strong liquidity to meet insurance liabilities.