AM Best Affirms Credit Ratings of China Shipowners Mutual Assurance Association

Business Wire

4 days ago

HONG KONG--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of 'a-' (Excellent) of China Shipowners Mutual Assurance Association (China P&I or the Club) (China). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect China P&I's balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
AM Best expects China P&I's risk-adjusted capitalisation, as measured by Best's Capital Adequacy Ratio (BCAR), to remain at the strongest level over the short to intermediate term, supported by very low underwriting leverage and sustained capital growth through earnings retention. The Club's consolidated capital and surplus increased moderately in 2024, driven by positive operating results and profit retention. China P&I continues to hold its long-term equity investments in China Minsheng Banking Corp., Ltd. (CMBC), which represents approximately 70% of total invested assets. This investment concentration risk remains an offsetting factor to China P&I's balance sheet strength, alongside the higher-than-average investment allocation to equities and sizeable gross losses of protection and indemnity (P&I) insurance that the Club is potentially exposed to. Conversely, supportive factors in AM Best's balance sheet strength assessment include the Club's prudent reserving practices in view of the long-tail nature of P&I insurance and its comprehensive reinsurance programme.
China P&I achieved stable operating results in 2024, mainly driven by favourable investment returns and moderate underwriting losses at a controllable level. The Club has consistently recorded net profit over the last five years. Based on AM Best's calculations, the Club's five-year average return-on-equity ratio was 4.4% (2020-2024). The Club's underwriting profitability was modestly impacted by rising losses incurred in a less benign year of claims, albeit partially offset by improvement in operating expenses. The Club continued to report stable investment returns in 2024, with a net investment yield (including capital gains or losses) of 5.0%, owing to a consistent track record of dividends and growth in the CMBC investment's book value.
Established in 1984, as a mutual association, the Club has become a leading player in China's P&I market and is one of the major hull insurance providers in the country. The Club's underwriting portfolio has remained stable with a focus on the domestic market of ocean-going vessels owned by Chinese shipowners. China P&I continues to explore opportunities in overseas markets, such as Southeast Asia to diversify its member base. In addition, the Club continues to leverage its long-term business partnerships with several international groups of P&I clubs in areas such as reinsurance support, loss prevention, claims services, product development, sharing local knowledge and professional network.
Negative rating actions may occur if China P&I's balance sheet strength no longer supports the current assessment, for example, due to material deterioration in the level of risk-adjusted capitalisation arising from heightened investment risks. Negative rating actions also may arise if China P&I's operating performance demonstrates a persistent deteriorating trend, for example, due to sustained and material investment losses, which significantly weigh down the Club's profitability or erode its capital position. Positive rating actions may occur if the Club achieves material and sustained enhancement in its global market presence over the intermediate term, while continuing to strengthen its leadership position in the domestic market.
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 Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.