AM Best Affirms Credit Ratings of Qianhai Reinsurance Co., Ltd.

HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Qianhai Reinsurance Co., Ltd. (QHR) (China). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect QHR’s 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.

QHR’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level at year-end 2023. Capital and surplus grew by 4.3% to RMB 3.5 billion (USD 500 million) in 2023, and further increased by 6.2% in the first three quarters of 2024, underpinned by the company’s full retention of net profit. Going forward, AM Best expects QHR to continue to receive financial support from its major shareholders and explore opportunities in capital markets to bolster its capital structure. The company has a diversified investment portfolio that is focused on cash and fixed-income securities, albeit with a moderate exposure to debt-type alternative investments.

QHR has remained profitable over the past few years, with a five-year average return-on-equity ratio of 4.3% (2019-2023). In 2023, the company posted a 77% year-on-year surge in net profit, due to the recovery of capital markets and investment valuations, which led to a growth in investment income. The company remained profitable during the first nine months of 2024.

The life reinsurance segment remains as the major driver of underwriting results. QHR continues to commit resources and strengthen its business relationships with China insurers and distribution partners to tap growth potential in traditional protection products. Additionally, the company has adopted a prudent approach toward expanding savings products in view of heightened challenges in asset-liability matching risk and scaling down its financial reinsurance business in consideration of changes in regulations and market demand. In terms of non-life reinsurance, the underwriting portfolio is diversified by product line with a focus on China’s non-catastrophe risks as it rebalanced its overseas book to improve business quality. QHR’s non-life segment’s combined ratio recorded a slight uptick in 2023, driven by an increase in the commission ratio while partially offset by a decrease in the loss ratio. Interest income from deposits, coupled with returns from bonds, equities and financial products, has continued to support QHR’s overall investment results over the past eight years.

QHR is a composite reinsurer controlled by three Chinese state-owned enterprises and plays a strategic role in the development of the Qianhai Free Trade Zone. Over the past few years, the company has continued to strengthen its market presence, while maintaining a profit-driven underwriting strategy.

Negative rating actions could occur if QHR’s risk-adjusted capitalisation declines significantly due to adverse deviation from its business and capital management plans, for example, much faster-than-expected expansion in underwriting and investment risks. Negative rating actions also could occur if the company demonstrates a sustained and adverse deterioration in its operating performance. Positive rating actions could arise if QHR’s domestic and overseas underwriting portfolios demonstrate sustained and favourable operating results that strengthen its overall operating performance, while its very strong balance sheet strength remains unchallenged.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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