Fitch expects rising profitability for Urtrust in near term

Urtrust maintains a solid capital buffer to support its rapid premium growth.

China-based Urtrust Insurance bears strong capitalisation, good financial performance stemming from improved underwriting, and manageable investment risk, despite weaker investment returns, according to Fitch Ratings.

Urtrust maintains a solid capital buffer to support its rapid premium growth and has limited asset risk. Fitch’s Prism Global Model rated Urtrust's capital strength as 'Very Strong' at the end of the first half of 2024 (H1 2024). 

The insurer's comprehensive solvency ratio improved to 459% (from 376% at the end of 2023), well above the regulatory minimum of 100%. 

This improvement resulted from reduced exposure to equity-type investments, and the company has no financial debt in its capital structure.

Urtrust has maintained a combined ratio below 100%, achieving 98% in H1 2024 and 99% in 2023, reflecting stable underwriting performance.

Its three-year average combined ratio (2021-2023) improved to 103% due to a reduction in expenses. However, profitability was hampered by poor investment returns, with a return on equity (ROE) of -2.1% in 2023, compared to a three-year average of 0.53%. 

Fitch expects profitability to improve as Urtrust shifts from volatile equity investments to more stable fixed-income investments.

Investment risk remains manageable, as Urtrust has reduced its exposure to risky assets like equity-type investments. By the end of H1 2024, risky assets accounted for 53% of total equity, down from 71% at the end of 2023. 

The insurer benefits from its relationship with the parent company Guangzhou Automobile Group, which strengthens its competitive position. Motor insurance remains the core business, contributing 78% of gross premiums in H1 2024, though the company is diversifying into non-motor insurance lines.

This rating highlights Urtrust’s ability to navigate investment challenges whilst maintaining robust underwriting and capital strength.