Fidelidade Macau’s capital adequacy ‘strong’, parent to keep it steady – Fitch Ratings

Its parent company is viewed as essential to the subsidiary, leading to a one-notch uplift to its standalone credit quality.

Fidelidade Macau is expected to have support from its parent company, Fidelidade - Companhia de Seguros, whilst its capital adequacy is deemed strong, Fitch Ratings reported.

Further, the insurer was seen to have favourable profitability, 'Moderate' company profile, and low investment and liquidity risk.

Fitch upgraded the IFS Rating due to a reassessment of Fidelidade Macau's strategic role to its parent, Fidelidade - Companhia de Seguros. The insurer is viewed as a 'Very Important' subsidiary, leading to a one-notch uplift to its standalone credit quality.

Its capital adequacy is expected to remain strong, with a Prism Model Score of 'Extremely Strong' at end-2022 and a statutory solvency ratio well above regulatory requirements.

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Despite a high expense ratio, Fidelidade Macau's combined ratio remains below the guideline for 'A' rated insurers. The insurer's return on equity and profitability are considered favourable, with expectations of benefiting from the recovery of Macao's tourism and construction projects.

Fitch also assesses Fidelidade Macau's company profile as 'Moderate', reflecting its small size and limited competitive positioning in Macao's non-life insurance market. The insurer's investment portfolio is low-risk, consisting mainly of bonds, cash, and deposits. The risky asset ratio is below the guideline for its rating, and Fidelidade Macau maintains a robust liquid asset/reserve ratio.

Overall, the upgrade signifies Fidelidade Macau's strengthened credit quality, supported by its strategic importance to the parent, robust financial metrics, and favourable business environment.