HONG KONG - OCTOBER 22, 2015
A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of China Reinsurance (Group) Corporation (China Re) and its members, China Property & Casualty Reinsurance Company Ltd. (China Re P&C), China Life Reinsurance Company Ltd. (China Re Life), and China Continent Property & Casualty Insurance Company Ltd. (CCIC). The outlook for all these ratings is stable. All companies are domiciled in China.
The ratings of China Re, China Re P&C, China Re Life and CCIC (collectively known as China Re Group) reflect the group’s strong consolidated risk-adjusted capitalization, prominent profile in China’s reinsurance market and profitable operating results. The ratings of China Re Group also reflect its unique status as the only state-owned reinsurance group in China, through direct ownership by the Ministry of Finance of the People’s Republic of China (PRC) and Central Huijin Investment Ltd (CHIL). CHIL is a wholly owned subsidiary of China Investment Corporation (CIC), which is the sovereign wealth fund of the PRC.
The ratings of China Re P&C, China Re Life and CCIC, also reflect their strategic importance to the group’s business strategies, their full integration into the group’s operations and management and the ongoing capital support received from the group.
China Re Group’s consolidated capital and surplus have recorded healthy organic growth in the past five years, supported by its consistent operating profits. As of December 2014, the group’s consolidated capital & surplus stood at CNY 54.6 billion (approximately USD 8.8 billion). The China Re Group continues to maintain a strong risk-adjusted capitalization on a consolidated basis, as reflected by its Best’s Capital Adequacy Ratio. The upcoming initial public offering of China Re Group is expected to further strengthen its capitalization, and at the same time enhance its financial flexibility as the group gains direct access to capital market.
With an operating history of 60 years in China, China Re Group has maintained a solid leading market position in the domestic reinsurance market. A.M. Best believes the group will maintain this strong presence given its long-term relationship with domestic cedants, strong shareholder support, and its diversified insurance portfolio mix of property and casualty (P&C) reinsurance, life reinsurance and direct P&C insurance.
China Re Group’s consolidated operating results have been favorable in the past five years. The improved return on equity in the past two years is mainly driven by the strong investment performance. With its diversified insurance and reinsurance business mix, the group has been able to record stable underwriting profits on a consolidated basis over the past five years.
Partially offsetting these factors are China Re Group’s losses from the Tianjin blast in August 2015. Based on the group’s initial estimates, the pre-tax financial impact to the entire group amounted from CNY 900 million to CNY 1.1 billion. It is not expected that the loss arising from Tianjin blast will have a material impact on China Re Group’s consolidated capitalization level, but it could negatively impact the group’s financial performance.
Another offsetting factor is the challenging operating environment in the domestic and overseas reinsurance markets. The upcoming implementation of China Risk Oriented Solvency System reform (C-ROSS) has created some uncertainties in the China reinsurance market in terms of business volume and composition. The potential increasing number of domestic reinsurers and recapitalization of existing onshore reinsurers in China could also intensify the market competition, which could impact China Re Group’s business prospects and operating results. Also, given the continuous soft market conditions in the global reinsurance market, it remains a challenge for China Re to explore profitable overseas business expansion opportunities.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
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