The net profit of China Reinsurance Corporation (China Re Group) declined by 59 percent during the first half of 2016 due to a significant drop in net realised investment gains.
According to S&P Global Ratings, the ratings on China Re Group and its subsidiaries, China Property & Casualty Reinsurance, and China Life Reinsurance, will remain unaffected by the decline in net profit.
S&P’s decision “considers the group’s capitalisation to remain supportive of its credit profile despite lower profit, which was largely due to a significant drop in net realised investment gains”.
S&P said: “We expect the persistent weakness in investment conditions to continue to put pressure on China Re Group's operating performance in 2016. However, we anticipate that the combined ratio of the group's property and casualty segment will remain stable during this time.”
The ratings company suggested that China Re Group will maintain its position in the domestic reinsurance market in China, “despite a likely gradual decline in the group's domestic P&C reinsurance premium income in 2016 and 2017 due to higher retention of risks by direct P&C insurers in China”.
China Re are yet to respond to a request for comment.
