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

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 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 assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

South China Insurance’s risk-adjusted capitalisation remained at the strongest level at year-end 2021, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s adjusted capital and surplus, including special reserves provisioned for the non-compulsory auto liability insurance business, continued to grow organically in 2021 through partial profit retention and favourable capital gains, while its statutory solvency ratio remained at a healthy level. The company’s investment portfolio remained liquid and diversified with a majority of its assets held in investment grade bonds and cash. The company continues to manage currency risk in its investment portfolio through currency hedging. AM Best notes that the company is exposed to a low and controlled level of ultimate claims arising from pandemic-related insurance products. Although the company experienced unrealised capital losses during the first three quarters of 2022, AM Best expects its BCAR and balance sheet strength will remain supportive of the current ratings over the short to intermediate term.

South China Insurance continued to be profit generating in 2021, as supported by positive underwriting and investment results. The company’s business continued to expand in 2021 with a gross premium written growth of 7.6%, while net combined ratio improved by 3.2 percentage points to 95.2%. The company’s positive investment results continued to support the company’s overall operating performance in 2021 through a stable stream of interest and dividend income. South China Insurance remained profitable during the first three quarters of 2022.

South China Insurance remains a medium-sized insurer in Taiwan’s non-life market. The company’s underwriting portfolio remains moderately diversified with motor dominating its business. While motor business continued to generate most of the premium growth in 2021, fire, as well as personal accident and health business also exhibited good growth momentum. The company continues to source its revenue from a diversified distribution network while leveraging cross-selling opportunities more broadly with its affiliates in Hua Nan Financial Holdings Co. Ltd.

Although South China Insurance is well-positioned at its current rating levels, negative rating actions may occur if there is a material decline in the company’s risk-adjusted capitalisation, or if there is a continued deteriorating trend or an increased level of adverse volatility in its operating performance.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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