HONG KONG--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and the issuer credit ratings of "a" of China Reinsurance (Group) Corporation (China Re) and its subsidiaries, China Property & Casualty Reinsurance Company Ltd. (CPCR) and China Life Reinsurance Company Ltd. (CLRC). The outlook for all ratings is stable.

The rating affirmations reflect China Re's excellent balance sheet strength, stable operating performance and established business profile as the only state-owned reinsurance group in Mainland China.

With an operating history of over 60 years, China Re has established a strong position in the domestic market, mainly stemming from its long term business relationships with its local cedants. In addition, A.M. Best believes the strong support received by China Re from its shareholders, the Ministry of Finance of China and Central Huijin Investment Ltd, a state-owned investment company, has been historically important to the growth of the group and will remain essential going forward.

China Re's balance sheet strength demonstrates strong risk-adjusted capitalization. While the company experienced organic growth in adjusted capital and surplus, its equity risk improved in 2010 arising from lower levels of unaffiliated private investments. The net premium leverage stood at a conservative level for 2010 Prospectively, A.M. Best anticipates the company's risk-based capitalization will remain supportive of its projected business growth over the next two years.

Partially offsetting these positive rating factors are increasing risk exposure to natural catastrophe losses worldwide and potential capital infusion to China Re's direct insurance subsidiary. Going forward, China Re is challenged to balance a high level of capitalization with alternative uses of capital to the direct insurance subsidiary, given its robust prospective business growth in the near term.

Through the first half of 2011, frequency and severity of catastrophe losses worldwide (including the New Zealand earthquake followed by the Japanese earthquake and tsunami) have exacerbated. In view of China Re's higher exposure in catastrophe-prone regions due to its growth initiatives in its international portfolio, A.M. Best views enterprise risk management is critical to China Re, which remains in a developing stage within the company which is continuing to work on a comprehensive and effective risk management framework. In addition, China Re, as with the reinsurance market, is challenged with managing the soft stage of the underwriting cycle.

The rating actions for CPCR and CLRC reflect the consistently profitable operating performance of both companies.

The underwriting performance of CPCR continues to be strong in 2010, while its combined ratio improved from the previous year. This result was due mainly to favorable loss experience during the year. While the company forecasts to maintain steady premium growth through 2012, the combined ratio is anticipated to trend upward, albeit remaining profitable in light of the competitive domestic market conditions.

As with the local industry's growth, CLRC experienced a year-on-year premium growth of 23% in 2010, reflective of strong economic growth in the country. As the investment portfolio continues to perform well, CLRC is expected to remain an important source of income for China Re.

The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include:

"Understanding Universal BCAR"; "Understanding BCAR for Property/Casualty Insurers"; "Understanding BCAR for Life/Health Insurers"; "Natural Catastrophe Stress Methodology"; "Assessing Country Risk"; and "Risk Management and the Rating Process for Insurance Companies." Methodologies can be found at www.ambest.com/ratings/methodology

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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