AM Best Affirms Credit Ratings of Central Reinsurance Corporation
August 07 2024 - 9:56AM
Business Wire
AM Best has affirmed the Financial Strength Rating of A
(Excellent) and the Long-Term Issuer Credit Rating of “a”
(Excellent) of Central Reinsurance Corporation (Central Re)
(Taiwan). The outlook of these Credit Ratings (ratings) is
stable.
The ratings reflect Central Re’s balance sheet strength, which
AM Best assesses as very strong, as well as its adequate operating
performance, favourable business profile and appropriate enterprise
risk management.
Central Re’s risk-adjusted capitalisation, as measured by Best’s
Capital Adequacy Ratio (BCAR), remained at the strongest level at
year-end 2023. The company’s adjusted capital and surplus increased
by 10% to TWD 21 billion in 2023, underpinned by organic
accumulation of operating profits during the year. Other supportive
factors of the balance sheet strength assessment include Central
Re’s prudent investment strategy, comprehensive retrocession
arrangement and high financial flexibility. The company’s
investment portfolio remains diversified and liquid, with the
majority of assets invested in cash and investment-grade bonds.
Going forward, AM Best expects Central Re to maintain a prudent
investment strategy and mainly focus on low-risk, fixed-income
investments.
Central Re posted a reported net profit of TWD 2.1 billion in
2023, with a five-year return on equity of 7.0% (2019 – 2023),
based on adjusted capital and surplus. The underwriting performance
of the company’s domestic non-life business recorded a
recovery-driven growth in 2023, after being significantly affected
by pandemic-related losses in the prior year, as its domestic life
business continued to deliver a solid stream of earnings. Central
Re’s overseas business reported modest profits in 2023, and
underwriting performance was partially impacted by some catastrophe
losses. Investment results benefitted from stable investment income
from the fixed-income assets and dividend income, while
fluctuations in currency exchange rates have added volatility to
the investment results over the last few years.
Leveraging its long operating history as Taiwan’s sole domestic
reinsurer, Central Re continues to benefit from solid and long-term
relationships with local cedants. The company encountered a modest
decline in domestic market share in recent years, given that its
portfolio skews towards personal lines, while the local market saw
more robust growth in commercial lines, AM Best views Central Re’s
domestic market leadership in both life and non-life reinsurance
segments will remain unchallenged over the medium term. In
contrast, the company has expanded its overseas business at
moderate growth rates over the last few years, which contributed to
about one-fifth of its overall underwriting portfolio at year-end
2023. AM Best expects Central Re to uphold its prudent underwriting
approach and strive for sustainable profitability, and over the
intermediate term, benefit from the enhanced diversification in
both its geography and clientele.
Negative rating actions could occur if there is a significant
decline in Central Re’s risk-adjusted capitalisation, for example,
due to unexpected large underwriting or investment losses. Negative
rating actions could also arise if the company’s business profile
exhibits a sustained diminishing trend that materially deviates
from its indicated plans. Positive rating actions could occur if
Central Re’s domestic and overseas underwriting portfolios
demonstrate sustained and favourable results to strengthen its
overall operating performance, while supporting its current
business profile.
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.
AM Best is a global credit rating agency, news publisher and
data analytics provider specialising in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
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Stephanie Mi Financial Analyst +852 2827
3402 stephanie.mi@ambest.com
James Chan Director, Analytics +852 2827
3418 james.chan@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com