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-” 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 categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

QHR’s balance sheet strength is supported by its risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as of year-end 2019. The company delivered its first year of net profit in 2019 since being established in December 2016, mainly driven by favourable underwriting results in the traditional life reinsurance business and investment performance, albeit partially offset by the marginal non-life underwriting results. The company is on track to extend this profitability trend in 2020. Going forward, AM Best expects the company’s capital position to strengthen gradually from full earnings retention, while the BCAR results remain supportive of the current ratings over the short to intermediate term. Other supportive factors to the balance sheet strength assessment include the capital commitment from its shareholders and the prudent retrocession arrangements.

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. Despite its short operating history, the company has established diversified non-life underwriting portfolios in its domestic China market and overseas markets in the Asia Pacific region. Amid rising demand for protection-type products in its domestic market, QHR continues to partner with cedant clients in the life reinsurance segment in offering traditional yearly renewable term policies covering health and critical illness. In addition, the company also provides savings reinsurance and capital management solutions in the form of financial reinsurance.

Offsetting rating factors include execution risks in the company carrying out its business plan due to QHR being in the start-up phase. Moreover, a material portion of the company’s investment portfolio is invested in higher-risk assets, including debt-type alternative assets and unlisted equities with lower levels of transparency and liquidity. The company’s mitigation measures include regularly conducting internal credit assessments of the invested assets along with a formulated set of risk limits to control its investment and concentration risks. Conversely, the company benefits from a strong stream of interest income and returns from its investment portfolio, which has helped to lower volatility arising from capital market movements and impairment losses related to some fixed-income securities.

Although QHR is well-positioned at its current rating level, negative rating actions could occur if the company’s risk-adjusted capitalisation declines significantly due to adverse deviation from its business plan, or if the company demonstrates a sustained deteriorating trend in its operating performance.

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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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Contacts

James Chan
Associate Director, Analytics
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Christopher Sharkey
Manager, Public Relations
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Christie Lee
Senior Director, Analytics
+852 2827 3413
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Jim Peavy
Director, Communications
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