AM Best Affirms Credit Ratings of South China Insurance Co., Ltd.

HONG KONG--()--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of South China Insurance Co., Ltd. (South China Insurance) (Taiwan). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect South China Insurance’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

The company’s balance sheet strength is well-supported by its robust level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), mainly attributed to the continued growth in capital and surplus through earnings retention and the accumulation of special reserves, as well as prudent investment strategies and a comprehensive reinsurance program. The company also benefits from enhanced financial flexibility by being part of the publicly traded Hua Nan Financial Holdings Co., Ltd.

The company consistently reported profitable operating results over the past five years. Claims experience improved in 2017 due to benign catastrophe experience. The company also maintains good control over its management expenses, which partially alleviates the increasing upward pressure on acquisition costs. While the combined ratio has remained slightly below industry average, the higher-than-peers premium leverage coupled with steady investment yields have contributed to the company’s favorable return on equity.

As a mid-sized player, the company deploys a diversified distribution strategy, including cross-selling opportunities with affiliates. It has been ranked consistently as the seventh-largest insurer in Taiwan’s non-life insurance market over the past few years (5.5% market share in terms of gross premiums written in 2017) while maintaining an established presence in key lines of business including motor, fire and casualty.

Offsetting rating factors include the continued competitive domestic market, upward pressure on acquisition expenses and the potentially more frequent occurrence of severe catastrophe events.

Positive rating actions are unlikely in the near term. Negative rating actions may occur if there is a material deterioration in the company’s risk-adjusted capitalization or if there is a deteriorating trend in operating performance such that it is considered no longer supportive of the current strong balance sheet strength assessment.

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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

James Chan
Senior Financial Analyst
+852 2827 3418
james.chan@ambest.com

Christie Lee
Director, Analytics
+852 2827 3413
christie.lee@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

Contacts

James Chan
Senior Financial Analyst
+852 2827 3418
james.chan@ambest.com

Christie Lee
Director, Analytics
+852 2827 3413
christie.lee@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com