HONG KONG--(BUSINESS WIRE)--
A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) and issuer credit rating of “a-” of South China Insurance
Co., Ltd. (South China Insurance) (Taiwan). The outlook for both
ratings is stable.
The ratings and outlook reflect South China Insurance’s solid
risk-adjusted capitalization and continued strong operating performance.
The company also moderately improved its market presence in Taiwan in
2011 through the continued enhancement of a multi-channel distribution
strategy. As a wholly owned insurance non-life arm of Hua Nan
Financial Holdings Co. Ltd., South China Insurance benefits in the
areas of risk management and product distribution through affiliated
South China Insurance’s risk-adjusted capitalization, as measured by
Best’s Capital Adequacy Ratio, remains sound and supportive of its
current ratings. A.M. Best believes South China Insurance will continue
to sustain its capitalization through retention of favorable net
earnings at a minimum regulatory level, in addition to a stable
underwriting and investment risk profile anticipated over the short to
South China Insurance achieved favorable operating results in 2010,
which were primarily supported by profitable underwriting results and
positive investment income during the year. A.M. Best expects the
company’s loss ratio to improve modestly for 2011, largely due to the
release of redundant reserves on prior year fire-related claims. In
addition, interest income from bonds and cash deposits, which
represented over 80% of the company’s invested assets as at September
30, 2011, is expected to partially alleviate the potential earnings
volatility associated with the financial markets in 2011.
Offsetting rating factors include the effect of soft market conditions
on South China Insurance’s core motor business and the challenge of
sustaining business growth in a continuing competitive market in Taiwan.
In light of the significance of the motor business relative to the
company’s underwriting portfolio, (which accounted for over 50% of total
gross premiums written over the past few years), prospective
underwriting profitability could be pressured by further deterioration
in motor loss experience under the prevailing soft pricing trend and
rising claims cost.
Future positive rating actions could occur if South China Insurance can
demonstrate notable improvement in its underwriting profitability,
especially in the company’s key motor portfolio over the medium to long
term. Alternatively, downward rating actions could occur if the
company’s risk-adjusted capitalization materially deteriorates or there
is a downward trend in underwriting or operating profitability.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include:
“Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best
Ratings”; and “Risk Management and the Rating Process for Insurance
Companies.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Co.Vivian Cheung, +852-2827-3411Financial
Lee, +852-2827-3402General Managermoungmo.email@example.comRachelle
Morrow, +1-908-439-2200, ext. 5378Senior Manager, Public
Peavy, +1-908-439-2200, ext. 5644Assistant Vice President,
Source: A.M. Best Co.