AM Best Affirms Credit Ratings of Cathay Century Insurance Company Limited

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 Cathay Century Insurance Company Limited (Cathay Century) (Taiwan). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Cathay Century’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.

Cathay Century’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), was at the strongest level in 2020. The company has been strengthening its adjusted capital and surplus over the past years through partial profit retention and the accumulation of special reserves, while the growth trend has continued in 2021. The company’s investment strategy remains conservative, with investment allocations in various broad asset classes largely stable as of the third quarter of 2021 (2021Q3) and a majority of the invested assets in low-risk fixed income securities. The company’s reinsurance programme remained appropriate and comprehensive, with reinsurer panels in good credit quality.

Cathay Century continues to deliver positive operating results as of 2021Q3, with a slight improvement in net profit in comparison with the same period in 2020, mainly driven by better investment results, while its underwriting portfolio remained stable and profit generating to support the overall operating results. The company’s net loss ratio and net expense ratio as of 2021Q3 remained at a similar level to the full-year ratios in 2020 at low nineties.

Cathay Century is the second-largest insurer in Taiwan’s non-life market in terms of gross premium written. The company’s underwriting portfolio remained diversified moderately, with the majority of its business in motor. The company continues to put strategic focus on personal line products, which accounted for over 70% of the company’s direct premium written as of 2021Q3 year-to-date. The company continues to receive distribution channel support from affiliated companies within the parent group, which accounted for over 60% of the company’s direct premium written as of 2021Q3.

Whilst Cathay Century is well-positioned at its current rating level, negative rating actions could occur if the company exhibits a material and sustained deterioration in operating performance, or if there is a substantial decline in its risk-adjusted capitalisation. A change in the credit profile of its parent company, Cathay Financial Holding Co., Ltd., also may pose a negative impact on Cathay Century’s ratings.

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 Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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