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 the Long-Term ICR is positive while the outlook of the FSR is stable. (See below for a detailed listing of the companies.)

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

China Re's consolidated risk-adjusted capitalisation remained at the strongest level at year-end 2020, as measured by Best's Capital Adequacy Ratio (BCAR). Total capital and surplus increased by 6.1% to RMB 102.9 billion (USD 15.8 billion) in 2020, supported by partial retention of net profits and favourable capital gains; total capital and surplus remained stable as of 30 June 2021. China Re has demonstrated good access to funding in the equity and debt capital markets, while its financial leverage remained at the low to moderate level. Its investment portfolio mix was largely stable with good liquidity.

The company's five-year average return-on-equity ratio was 6.5% (2016-2020), mainly attributed to favourable investment returns supported by a growing stream of interest income sourced from fixed-income investments, which made up majority of its investment portfolio. Notwithstanding, the underwriting results of China Re's domestic property/casualty (P/C) insurance and reinsurance businesses were negatively impacted, to varied extents, by deteriorating conditions in the motor line due to the comprehensive reform and multiple catastrophe-related losses in 2020 and 2021. Conversely, premium revenue of its overseas P/C reinsurance segment benefited from hardened rates with the underwriting margin rebounding favourably in the first half of 2021 from the profound impact of the COVID-19 pandemic in 2020. Notwithstanding, the full-year 2021 result is exposed to potential volatility arising from major catastrophe losses.

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 continues to strengthen its foothold in the global reinsurance market, with Chaucer , the collective franchise comprising China Re International Holdings Limited, Chaucer Insurance Company Designated Activity Company and China Re Australia HoldCo Pty Ltd, being the major driver of overseas P/C reinsurance revenue. However, the company's top-line in the domestic life reinsurance segment experienced a significant decline in the first half of 2021, attributed to fast-changing market conditions, while the overseas portion remained largely stable.

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 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 Hujin 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 an enhanced level of global diversification in its P/C and life reinsurance portfolios with sustained improvement in underwriting performance.

Conversely, 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.

The FSR of A (Excellent) and the Long-Term ICRs of 'a' (Excellent) have been affirmed, and the outlook of the Long-Term ICR is positive while the FSR outlook is stable 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 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.

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