A.M. Best Affirms Rating of China International Reinsurance Company.Business & Insurance Editors OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 22, 2001 A.M. Best Co. has affirmed the A- (Excellent) financial strength rating of China International Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Company, Limited, Hong Kong. The company's Financial Size Category is Class VII. The rating carries a positive outlook. The rating reflects the company's improved capital position as a result of the initial public offering of its holding company, China Insurance International Holdings Company Limited, conservative underwriting leverage and strong distribution capability. The listing gives the company access to public capital to meet future growth needs. In addition, the company has maintained a competitive position in its core market and has a stable and seasoned management team. China Insurance International Holdings (CIIH CIIH China Insurance International Holdings Company Limited (stock symbol) ) launched its initial public offering in June 2000, with the company representing the principal assets. CIIH is registered in Hong Kong with its shares listed on the Main Board of the Stock Exchange of Hong Kong Stock Exchange of Hong Kong (SEHK) Only stock exchange located in Hong Kong. . The company's former shareholders, China Insurance H.K. (Holdings) Co. Ltd. and The Ming An Insurance Co. (H.K.), Ltd., have transferred their stake to CIIH and become majority shareholders for CIIH with 61.75% combined shareholding. As a result of the IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. , the company's paid-up capital Paid-Up Capital The total amount of shareholder capital that has been paid in full by shareholders. Notes: Paid-up capital is essentially the portion of authorized stock that the company has issued and received payment for. is increased from HKD HKD In currencies, this is the abbreviation for the Hong Kong Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. $600 million as of 31 December 1999 to HKD $780 million as of 28 July 2000. China International Reinsurance has maintained conservative underwriting leverage in recent years. The net premium written in 1999 was 0.81 times the surplus and, given the successful IPO, will be further reduced. This is necessary as the company is exposed to substantial catastrophic risks and has been hit by some large catastrophe losses in recent years, such as the earthquakes in Turkey and Columbia in 1999 and Hurricane Georges and Hurricane Mitch in 1998. However, an adequate reinsurance protection arrangement has effectively contained the impact of these catastrophe losses to a reasonable extent. Despite difficult underwriting conditions in 1999 and 1998, the company maintained a profitable underwriting margin--underwriting profit/net premium--of 2% and 5% respectively on an accounting year basis. In addition, the favorable tax status for reinsurers writing offshore business affords the company strong internal capital generation capability, which is augmented by the access to the public capital market through the holding company listing. In addition to the strong core market position, the company is well positioned to explore new market opportunities, such as China's emerging reinsurance market in both life and non-life sectors given the WTO See World Trade Organization. prospect. Being a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of a state owned China Insurance Group, formerly part of the The People's Insurance Company of China People's Insurance Company of China Holdings Company (中国人保控股公司) is a state-owned company in the People's Republic of China. , the company has a competitive edge in the potentially large life reinsurance market in China. Offsetting rating factors include a substantial increase in the loss ratio for year 1997 on an underwriting year basis, and underwriting years 1998 and 1999 are expected to be less than satisfactory. Mitigating rating factors include impact on the loss ratio for underwriting year 1997 through strengthening of IBNR IBNR Incurred But Not Reported IBNR Interesting But Not Relevant by HKD $11 million and loss reserve carryover from previous underwriting years. The same ratio is 52.5% after adjustment. In addition, the company maintains a reinsurance protection cover that, while adequate, is less than that of higher-rated reinsurers. This will be a consideration as the catastrophic exposure is growing quickly with the company seeking to expand outside of its core market. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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