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 remained at the strongest level as of year-end 2020, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus increased moderately from organic growth in net profit since 2019. Going forward, AM Best expects the company to continue to benefit from financial support from its shareholders and maintain its capital strength to support business expansion over the short to intermediate term. Other supportive factors to the balance sheet strength include the prudent retrocession arrangements and the diversified investment portfolio focused on cash and fixed-income securities, albeit with a moderate exposure to debt-type alternative investments.

QHR’s net profit surged significantly in 2020 as a combined result of improved underwriting margin, and growth in investment income, as well as favourable capital gains. Return on equity improved to 6.9% in 2020 from 1.8% in 2019. The company continues to tap on growth potential in traditional yearly renewable-term business with underlying risks mainly in medical and critical illness products, while dynamically adjusting its risk appetite in long-term savings and financial reinsurance businesses in view of changes in the operating environment. Notwithstanding, AM Best expects the company’s non-life underwriting result to face negative pressure from some major catastrophe and risk losses in 2021, including the Henan floods in China. However, the growing stream of investment income has contributed to support overall earnings over the past few 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. Despite its short operating history, the company has established diversified non-life underwriting portfolios in the domestic China market and several markets in Asia Pacific.

The stable outlooks reflect AM Best’s expectation that the new management team will lead the company successfully to execute its business plan and capital management plan without material adverse deviation. It also is expected that QHR will maintain its solid risk-adjusted capitalisation with continued strong shareholder support.

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 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. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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James Chan
Associate Director

+852 2827 3418

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Christopher Sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

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Christie Lee
Senior Director, Analytics

+852 2827 3413

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Jim Peavy
Director, Communications

+1 908 439 2200, ext. 5644

[email protected]

Source: AM Best