Fitch Ratings affirmed the insurer financial strength rating of China United Property Insurance Co. Ltd. at A-, with a stable outlook.

The rating agency said June 2 that the rating reflects the rating on the insurer's parent, China Orient Asset Management Co. Ltd. The stand-alone assessment on the insurer reflects its improving regulatory solvency buffer, its competitive edge in agricultural insurance, the use of reinsurance to mitigate underwriting volatility and its record of operating profitability.

These strengths are offset by the company's volatile operating results, competitive pressure on its primary business of motor insurance and higher financial leverage. Fitch notes that the implementation of commercial motor insurance pricing deregulation also weakened the company's underwriting result for 2016.

A significant change in ownership, a deterioration in the insurer's capital score, a weaker underwriting profitability with a combined ratio consistently higher than 103% and a rise in financial leverage to above 35% may lead to a downward ratings action.

Fitch says an upgrade is unlikely in the near term given the insurer's small capital buffer. However, the rating may be raised in the medium term if its capital score improves, its operating stability strengthens with a combined ratio below 97% and if its financial leverage stays below 25%.