A.M. Best has assigned a financial strength rating of A (Excellent) and a long-term issuer credit rating of “a” to Ireland-based Chaucer Insurance Company Designated Activity Company (CIC).
It has also affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” of China Reinsurance Corporation (China Re) and its subsidiaries, China Property & Casualty Reinsurance Company, China Life Reinsurance Company and China Continent Property & Casualty Insurance Company.
CIC is a newly added member of China Re, of which China Re P&C, China Re Life and China Continent Insurance are the other members.
The ratings reflect China Re’s balance sheet strength, which A.M. Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The ratings also recognise China Re as the sole state-owned reinsurance group in China, through the 11.45 percent stake owned directly by the Ministry of Finance of the People’s Republic of China (PRC) and the 71.56 percent stake owned by Central Hujin Investment, which is a wholly-owned subsidiary of the PRC’s sovereign wealth fund, the China Investment Corporation.
China Re’s consolidated risk-adjusted capitalisation remained at the strongest level as of year-end 2018. As a publicly listed company, China Re has favourable financial flexibility from the equity market and debt market, according to A.M. Best.
China Re completed the closing of the acquisition of 100 percent equity interest of Chaucer, the collective franchise comprising China Re International Holdings, CIC and China Re Australia HoldCo on 28 December 2018, 14 February 2019, and 10 April 2019, respectively.
The rating company expects China Re’s consolidated adjusted financial leverage ratio will remain at a moderate level in 2019.
It explained that the group has a track record of profitable operating results, mainly attributed to favourable investment return from fixed-income investments, while underwriting margins across the group’s key business segments remain subdued due to the continued intense market competition.
Positive rating actions could occur if China Re’s global footprint can demonstrate a strengthening trend through successfully integrating with Chaucer, or if the company demonstrates sustained improvement in its underwriting profitability.
However, A.M. Best suggested that negative rating action could happen if China Re’s consolidated risk-adjusted capitalisation decreases significantly, its leverage ratio increases significantly or if the company exhibits a sustained deteriorating trend in its operating performance.
