Urtrust Insurance, a China-based insurer, is set for improved profitability, backed by strong capitalisation, stable underwriting performance, and manageable investment risks, according to a recent report by Fitch Ratings.
The company’s solid capital buffer is a key factor supporting its rapid premium growth, while its asset risk remains limited. Fitch’s Prism Global Model rated Urtrust’s capital strength as “Very Strong” by the end of the first half of 2024 (H1 2024).
Urtrust’s comprehensive solvency ratio, a key measure of an insurer’s financial health, surged to 459% in H1 2024, up from 376% at the end of 2023. This is significantly higher than the regulatory minimum of 100%, demonstrating the insurer’s financial resilience. The improvement in the solvency ratio was largely attributed to a reduced exposure to equity-type investments. Additionally, the company has no financial debt in its capital structure, further solidifying its financial footing.
In terms of operational performance, Urtrust has maintained a combined ratio below 100%, with a 98% ratio recorded in H1 2024, compared to 99% in 2023. The combined ratio, which measures an insurer’s underwriting profitability, indicates a stable underwriting performance. Over the past three years (2021-2023), the company’s average combined ratio improved to 103%, driven by a reduction in operational expenses.
However, despite this stable underwriting performance, Urtrust’s overall profitability has been negatively impacted by poor investment returns. The company reported a return on equity (ROE) of -2.1% in 2023, a significant drop compared to its three-year average ROE of 0.53%. Fitch anticipates that Urtrust’s profitability will improve as the insurer shifts its investment strategy from volatile equity markets to more stable fixed-income investments.
Urtrust’s investment risk has been significantly reduced, with risky assets—such as equity-type investments—accounting for 53% of total equity by the end of H1 2024, down from 71% at the end of 2023. This shift to safer assets has helped the company better manage its investment risk.
The insurer also benefits from its strong relationship with its parent company, Guangzhou Automobile Group. This relationship enhances Urtrust’s competitive position in the market, particularly in the motor insurance segment, which accounted for 78% of its gross premiums in H1 2024. Although motor insurance remains the core business, the company is diversifying into non-motor insurance lines to broaden its market presence.
Fitch’s analysis highlights Urtrust’s ability to overcome investment challenges while maintaining robust capital strength and stable underwriting, setting the stage for stronger profitability in the near term.
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