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| [December 06, 2018] |
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AM Best Affirms Credit Ratings of Qianhai Reinsurance Co., Ltd.
AM Best has affirmed the Financial Strength Rating of A-
(Excellent) and the Long-Term Issuer Credit Rating of "a-" of Qianhai
Reinsurance Co., Ltd. (QHR) (China). The outlook of these
Credit Ratings (ratings) is stable.
Founded in December 2016 with an initial capitalization of RMB 3 billion
(USD 461 million), QHR is a composite reinsurer controlled by three
Chinese state-owned enterprises. The company underwrites mainly
proportional treaty business in the non-life segment. In the life
reinsurance segment, it offers traditional life protection products and
savings products, as well as capital management solutions in the form of
financial reinsurance.
The ratings reflect QHR's balance sheet strength, which AM Best
categorizes as very strong, as well as its adequate operating
performance, neutral business profile and appropriate enterprise risk
management.
QHR's very strong balance sheet strength is supported by its
conservative underwriting leverage and low net catastrophe retention.
The company benefits from strong shareholder support and commitment, and
expects to exercise full profit retention within its first five years of
operation. In spite of conservative loss ratio assumptions, QHR expects
to generate net operating profits starting from its third year of
operation (2019). As of September 2018, the company's overall premium
income and profitability levels have been largely in line with its
business plan. QHR plays a strategically important role in the
development of the Qianhai Free Trade Zone, which is designated as a
regional reinsurance hub by China's regulator.
Offsetting rating factors include QHR's relatively high investment risk,
as a material portion of its investment portfolio consists of equities
and alternative assets, resuling in vulnerability to capital market
volatility, as well as liquidity risk and credit risk exposure. In
addition, day one loss from long-term savings reinsurance products adds
pressure to the company's profitability in the initial years of risk
assumption. Due to its startup nature, QHR also faces execution risk in
achieving its business plan.
While positive rating actions are unlikely in the near term, negative
rating actions could occur if the company materially deviates from its
business plan, including an adverse deviation from its projections, or
if its liquidity or risk-adjusted capitalization levels diverge from AM
Best's expectations. A reduced level of commitment from the three
strategic shareholders also would impact the ratings negatively.
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 Understanding
Best's Credit Ratings. For information on the proper media
use of Best's Credit Ratings and AM Best press releases, please view Guide
for Media - Proper Use of Best's Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
View source version on businesswire.com: https://www.businesswire.com/news/home/20181206005744/en/
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