A.M. Best Affirms Ratings for China International Reinsurance Company Limited.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating (ICR) of "a-" for China International Reinsurance Company Limited (CIRe) (Hong Kong). The outlook on both ratings has been revised to stable from positive.

The ratings reflect CIRe's high liquidity position, favorable investment yield, prudent reserving practice and diverse geographic spread of risk relative to its regional peers in Asia. The ratings also acknowledge the company's satisfactory risk-based capitalization and well established profile in Hong Kong, Macau and Mainland China.

As a result of various weather-related catastrophic losses, CIRe suffered an increase in its net loss ratio to 74.2% in 2005 from 72.1% in 2004, leading to a decline in underwriting profits in 2005. Its aggregate net exposure to Hurricane Katrina and the flooding event in Mumbai in 2005 exceeded HKD 212 million (USD 27.25 million) as of December 31, 2005.

Notwithstanding the challenging operating environment in the reinsurance market, A.M. Best believes that CIRe, through its linkage with the China Insurance Group, will be able to further secure its business position in its core markets, especially in Mainland China, in the mid to long term. In addition, in view of the absence of major catastrophic events, underwriting performance in 2006 is expected to experience a significant improvement.

With approximately 66.4% of total assets allocated to cash and high quality fixed income instruments at the end of June 2006, the company maintains a high liquidity position with regard to the risks underwritten. Consistent earnings from its conservative investment portfolio contributed favorably to CIRe's overall operating results over the last five years.

Marginal growth in surplus, elevated underwriting leverage and significant net catastrophic exposure exacerbated CIRe's risk-based capitalization in 2005, although the risk-adjusted capitalization, which is measured by Best's Capital Adequacy Ratio, indicates an adequate margin to support its current rating. Prospectively, A.M. Best anticipates that higher levels of retained earnings due to strong operating results in 2006 will enhance the company's financial strength, although further premium expansion will burden the risk-based capitalization.

Offsetting these positive factors are the company's limited capacity relative to other global reinsurers and the ongoing capital support required of CIRe's holding company in association with the organic growth of the operating subsidiaries, namely Tai Ping Life and Tai Ping Insurance in China. The revised outlook reflects CIRe's potential severe catastrophe losses in relation to the current level of capitalization.

While CIRe is not involved in long-tailed liability reinsurance outside Asia, A.M. Best remains cautious of the company's potential worldwide catastrophic risk on a net basis. Higher than normal frequency of weather-related losses could translate into underwriting volatility for CIRe and potentially impact the company's capitalization.

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.