2 September 2016 Insurance

China Re’s ratings unaffected by steep decline in profits

The A+ ratings of China Re and its subsidiaries, China Property & Casualty Re and China Life Re, are unaffected by the 59 percent decline in the group’s net profit for the six-month period ending June 30, according to S&P Global Ratings.

S&P believes China Re’s capitalisation will remain supportive of its credit profile despite lower profits, which was largely due to a significant drop in net realised investment gains.

While the persistent weakness in investment conditions is expected to continue to put pressure on China Re’s operating performance, S&P anticipates that the combined ratio of the property/casualty segment will remain stable.

As far as losses from catastrophes are concerned, the losses from the Tianjin port explosion in 2015 did not impose significant adverse development in China Re Group's loss reserves.
The ratings agency expects the effects of the June-July mass flooding in China to have limited impact on China Re’s underwriting results due to low levels of insurance penetration in the affected areas.

S&P believes China Re will maintain a leading position in the domestic reinsurance market in china, despite a likely gradual decline in the group's domestic property/casualty reinsurance premium income in 2016 and 2017 due to higher retention of risks by direct property/casualty insurers.

The ratings agency expect the group's revenues from other segments, including life reinsurance, direct P&C insurance, and international property/casualty reinsurance to support its total revenue growth in 2016.

“While the group's international property and casualty reinsurance premiums grew 9.1 percent year on year in the first half of 2016, their contribution to the group's total premium remains small at 2.1 percent,” said S&P.

“We expect the group to maintain a prudent strategy in growing its overseas reinsurance business through its presence in Europe, North America, and its new branch setup in Singapore.”

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