AM Best Affirms Credit Ratings of China Reinsurance (Group) Corporation and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a+” (Excellent) of China Reinsurance (Group) Corporation (China Re) (China) and its subsidiaries. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies.)

The ratings of China Re reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.

China Re’s consolidated risk-adjusted capitalisation remained at the strongest level at year-end 2022, as measured by Best’s Capital Adequacy Ratio (BCAR). Total capital and surplus declined by 7.3% to RMB 94.7 billion (USD 13.7 billion) as net profits were more than offset by an unfavourable decline in investment fair values and dividend payouts. Going forward, AM Best expects that China Re’s capital position will return to moderate growth and remain supportive of its continued growth in underwriting and asset risks over the short to intermediate term. China Re has demonstrated good access to funding in the equity and debt capital markets, while its financial leverage remains at the low to moderate level. The company’s investment portfolio mix was largely stable with good liquidity.

The company has been consistently profitable over the past five years, with an average return-on-equity ratio of 5.0% (2018-2022), mainly supported by returns on interest income sourced from fixed-income investments, which comprise the majority of its investment portfolio. In terms of underwriting results, the company’s domestic property/casualty (P/C) reinsurance segment continued to deliver a stable yet thin margin. Conversely, the overseas P/C reinsurance segment recovered from the negative impacts from COVID-19 in 2020 and remained favourable in 2021 and 2022, despite being partially encumbered by losses and provisions related to the Russia-Ukraine conflict and natural catastrophes in some overseas markets in 2022 and thus far in 2023. China Re’s life reinsurance profitability was lower in 2022 than in recent years, while the group continued to adjust its book of business to meet its clients’ needs.

China Re maintains the leading position in its domestic P/C and life reinsurance markets, as well as being a top-ranked company in the country’s primary P/C segment. The group benefits from the successful integration with Chaucer, the collective franchise comprising China Re International Holdings Limited, Chaucer Insurance Company Designated Activity Company and China Re Australia HoldCo Pty Ltd, which continues to be the major driver of overseas P/C reinsurance revenue and helps strengthen the group’s business footprint in the global reinsurance market. The top-line performance of the company’s domestic P/C reinsurance segment has remained resilient over the past few years. Notwithstanding, the company’s life reinsurance segment experienced fast-changing market conditions. Robust growth in domestic savings-type products since 2022 was more than offset by the material shrinkage in domestic financial reinsurance and overseas savings-type businesses.

The ratings also recognise the strategic role China Re has in supporting the continuous development of China’s insurance and reinsurance industry. There is a high likelihood of government support given China Re’s status as the sole state-owned reinsurance group in the country, through the 11.45% stake owned directly by the Ministry of Finance of the People’s Republic of China (PRC) and the 71.56% stake owned by Central Huijin Investment Ltd., a wholly owned subsidiary of the PRC’s sovereign wealth fund, the China Investment Corporation.

Positive rating actions could occur if China Re demonstrates a major improvement in its balance sheet strength by sustainably strengthening its capital position through operating earnings without adverse underwriting results or investment volatility. Negative rating actions could occur if the company’s consolidated risk-adjusted capitalisation decreases significantly or its leverage ratio increases substantially. Negative rating actions could also occur if the group exhibits a sustained deteriorating trend in its operating performance, for example, due to adverse macroeconomic or capital market conditions.

The FSR of A (Excellent) and the Long-Term ICR of “a+” (Excellent) have been affirmed, with stable outlooks, for the following subsidiaries of China Reinsurance (Group) Corporation:

• China Property & Casualty Reinsurance Company Ltd.
• China Life Reinsurance Company Ltd.
• China Continent Property & Casualty Insurance Company Ltd.
• China Reinsurance (Hong Kong) Company Limited
• Chaucer Insurance Company Designated Activity Company

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 AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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