Best Affirms Rating for China International Reinsurance

February 15, 2005

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and assigned an issuer credit rating of “a-” to China International Reinsurance Company Limited (CIRe) (Hong Kong). The outlook is positive.

The rating reflects CIRe’s consistently strong operating performance, steady growth of capitalization through retention of earnings, prudent investment policy and outstanding market presence in the Hong Kong and Macau insurance markets.

CIRe has persistently generated underwriting earnings for the company over the last five years. Notwithstanding the outbreak of SARS in 2003, CIRe was able to maintain its net loss ratio at a level of 71.3%. Given its stable cost structure, CIRe’s combined ratio in 2003 was still kept at a level below 100%.

Additionally, the Indonesian earthquake and subsequent tsunami that occurred in December 2004 is expected to have a limited impact on CIRe’s overall operating results due to its prudent retrocession arrangement.

The Best’s Capital Adequacy Ratio, which measures capitalization on a risk-adjusted basis, demonstrates that CIRe is strongly capitalized. Consistent growth in internal surplus has greatly strengthened the company’s capitalization over the last five years. CIRe’s capital and surplus grew by approximately 20% in 2003. High retention of earnings, along with the stringent top-line growth approach, improved the net premium leverage to 0.78 times in 2003 from 0.92 times in 2002.

CIRe maintains strong liquidity within its investment portfolio. As of fiscal year-end 2003, cash and fixed income securities represented 72% of CIRe’s total assets. The investment portfolio contributed positively to the company’s profitability over the past five years.

Offsetting factors include CIRe’s worldwide risk exposures, small capacity relative to international reinsurers and CIRe’s parent company’s capital commitment to support the rapid expansion of its sister companies, Tai Ping Life and Tai Ping Insurance, in China.

China International Insurance Holdings (CIIH), the immediate holding company of CIRe, commits to providing capital support for the business expansion of Tai Ping Life and Tai Ping Insurance. In light of the uncertainties arising from the dynamic changes in the China insurance markets, CIIH however, could be challenged by various risks resulting from managing the rapid business growth in China.

A.M. Best will reportedly closely monitor the development in the group business and the capital position.

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