China Re maintains a solid leading position in the domestic reinsurance market, which is not expected to be challenged in the medium term, although there are new market entries, says A.M. Best.
The international rating agency deems China Re’s balance sheet strength as very strong, and notes the reinsurer's adequate operating performance, neutral business profile and appropriate enterprise risk management.
China Re is the sole state-owned reinsurance group in China, through the 11.45% stake owned directly by the Ministry of Finance and the 71.56% stake owned by Central Hujin Investment, which is a wholly owned subsidiary of the Chinese sovereign wealth fund, the China Investment Corporation.
As a publicly listed company, China Re has favourable financial flexibility from the equity market and debt market, says A.M. Best. The group issued two senior notes, totaling $1.5bn in 2017. In August and November 2018, subsidiaries China Re P&C and China Re Life also issued CNY4bn ($580m) and CNY5bn capital supplementary bonds, respectively.
A.M. Best expects the group’s financial leverage to remain at a moderate level this year.
The group’s international footprint is expanding gradually but remains limited; however, this is without considering consolidating the book of business from The Hanover Insurance Holdings, Chaucer Insurance Company Designated Activity Company and The Hanover Australia Holding Company (collectively referred to as Chaucer), given the acquisition is pending regulatory approval.
The China Re group has a track record of profitable operating results, mainly attributed to favourable investment income from fixed income investments.
Underwriting profit remains challenging for direct and reinsurance property and casualty markets due to motor liberalisation and intense market competition. The company is subject to policy risk from C-ROSS Phase 2 implementation, which increases uncertainties on reinsurance demands in the upcoming years. China Re’s risk management capabilities are considered appropriate for its risk profile.