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A.M. Best Affirms Credit Ratings of Peak Reinsurance Company Limited and Its Subsidiary


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Vivian Cheung
Senior Financial Analyst
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Christie Lee
Director, Analytics
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Christopher Sharkey
Manager, Public Relations
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Jim Peavy
Director, Public Relations
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FOR IMMEDIATE RELEASE

HONG KONG - DECEMBER 15, 2017 12:18 PM (EST)
A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Peak Reinsurance Company Limited (Peak Re) (Hong Kong) and its subsidiary, Peak Reinsurance AG (Peak Re AG) (Switzerland). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Peak Re’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Peak Re’s very strong balance sheet is underpinned by sound risk-adjusted capitalization. Although the company had increased its underwriting leverage due to strong premium growth in 2017, investment risk was scaled down, as the company reduced its equity risk exposure and improved the credit profile of its fixed-income investments.

A.M. Best expects Peak Re’s operating performance to remain adequate. Despite losses reported from hurricanes that struck the United States and the Caribbean during the third quarter of 2017, the company’s net underwriting loss is expected to remain manageable as Peak Re had purchased adequate retrocession cover and effectively ceded out its gross exposure. A.M. Best expects operating income to remain positive, with sufficient investment income to fully offset the negative underwriting performance anticipated for 2017. The company had further diversified its geographical exposure and lines of business to achieve a more balanced underwriting portfolio. Peak Re also converted its branch office in Zurich into a subsidiary (Peak Re AG) in December 2016, intending to strengthen its presence in the European market.

These positive rating factors are offset partially by the volatility in its operating performance as a startup reinsurer with a relatively short operating history, and also the risk of net retentions from multiple catastrophe events from its global book of business. Peak Re utilizes professional catastrophe modeling tools to monitor its exposure internally alongside a prudent retrocession arrangement.

Positive rating actions are unlikely in the near term. Negative rating actions may occur if the company’s risk-adjusted capitalization, liquidity position or financial flexibility level decline to a level below A.M. Best’s expectations, or there is a deteriorating trend in underwriting or investment results. Deterioration in the credit profile of Peak Re’s controlling shareholder, Fosun International Holdings Ltd., may result in a negative impact on Peak Re’s ratings.

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

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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