AM Best Withdraws Credit Ratings of Zhongyuan Agricultural Insurance Co., Ltd.

HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Zhongyuan Agricultural Insurance Co., Ltd. (ZYIC) (China). The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has withdrawn the ratings as the company has requested to no longer participate in AM Best’s interactive rating process.

The ratings reflect ZYIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level as of year-end 2021. AM Best expects the company to benefit from capital support from its shareholders to support its business expansion over the short to intermediate term. The company’s fixed income oriented investment portfolio with strong liquidity and a debt-free balance sheet are also supportive factors of its overall balance sheet strength. Given its strategic focus on agricultural insurance, the company’s significant catastrophe risk exposure relative to its capital size continues to be the key offsetting factor, despite being partially mitigated by product and geographical diversification.

Robust growth in key products including crop and livestock contributed to the expansion in ZYIC’s premium income in 2021 and 2022. Coupled with improved claims experience, the company projects a strong increase in net earnings in 2022. Following the impairment losses related to premium receivables in 2019 and 2020, the company took remediation efforts and reported a favourable reversal of a bad debt provision in 2021. ZYIC’s net investment yield gradually improved during 2019 through 2021 due to higher income and capital gains. Notwithstanding, the company’s overall earnings in 2022 was partially affected by negative investment results due to the unfavourable capital market conditions during the year.

The company has been the leading professional agricultural insurer in Henan for six consecutive years. ZYIC also continues to strengthen its business presence in Inner Mongolia and Heilongjiang, supported by favourable tender results of policy-oriented programmes to secure its business from 2022 to 2024. Crop and livestock insurance accounted for about three-quarters of ZYIC’s gross premium written in 2022. The company also aims to expand offerings of motor, accident and health, and property products that support the agricultural industry.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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