AM Best has upgraded the Long-Term Issuer Credit Rating to “a+” from “a” and affirmed the Financial Strength Rating (FSR) of A of China Reinsurance (Group) Corporation (China Re) (China) and its subsidiaries.
According to AM Best, China Re’s ratings 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 (ERM).
It has also revised the reinsurer’s outlook of the Long-Term ICR to stable from positive, while the outlook of the FSR is stable.
The rating agency said: “The Long-Term ICR upgrade reflects China Re’s strengthened business profile in the global reinsurance market with its 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 has been the growth driver of overseas P/C reinsurance premium income since its acquisition in 2019 and contributed to the improved diversification in the group’s underwriting portfolios and business segments.”
It added: “Moreover, the group continues to maintain 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 places a strategic focus on expanding non-motor products in its domestic P/C segments while adjusting its life reinsurance book to meet client needs.
“Expansions in protection-type and financial reinsurance contribute to offset significant shrinkage in savings-type products, following the premium shrinkage experienced by domestic primary life insurers.”
Additionally, AM Best noted that these ratings also recognised China Re’s strategic role in supporting the continuous development of China’s insurance and reinsurance industry.
It also noted the high likelihood of government support given its 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 actions towards China Re’s ratings are unlikely over the short to intermediate term, according to AM Best, negative rating actions could occur if there is a material decline in the company’s risk-adjusted capitalisation or if its leverage ratio increases significantly.
Negative rating actions could also occur if the company exhibits a sustained deteriorating trend in its operating performance, for example, due to adverse macroeconomic or capital market conditions.
