Zking Property & Casualty Insurance Co., Ltd. (ZKI) has seen notable improvements in its financial metrics, according to a recent report from Fitch Ratings. The insurer’s regulatory comprehensive solvency ratio increased to 361% at the end of the third quarter of 2024, up from 348% at the close of 2023. This positive development reflects stronger available capital, which has enhanced the company’s ability to manage market and credit risks, especially following a reduction in exposure to high-risk credit and guarantee insurance sectors that carry higher solvency capital charges.
ZKI’s financial leverage also rose to 21%, following the issuance of a $340 million (CNY 2.5 billion) capital supplementary bond in December 2023. Despite this increase, the insurer has focused on decreasing its exposure to riskier insurance lines, which has positively impacted its combined ratio. For Q3 2024, the combined ratio improved to 100%, compared to 105% in the same period last year. This improvement is attributed to a reduction in expense ratios and a strategic scaling back of its involvement in guarantee insurance, a traditionally riskier business line.
Looking ahead, ZKI is forecasting a return on equity (ROE) of 5% by the end of 2024, a significant increase from the 2.6% ROE recorded during the first nine months of the year. The insurer’s exposure to higher-risk assets, such as equities and non-investment-grade bonds, increased to 73% of its shareholders’ capital by September 2024, up from 54% at the end of 2022. While this shift aims to enhance long-term returns through equity investments, it also exposes the company to greater market volatility.
ZKI’s strong operational and financial support is bolstered by its ownership link with the Jiangsu provincial government. Government-affiliated entities hold a 42.08% stake in the company, with Jiangsu Guoxin Investment Group Limited owning the largest share at 21.5%.
The insurer’s strong risk-based capital and the improved financial metrics reflect its ongoing efforts to optimize its risk profile while aiming for sustainable long-term growth.
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