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FOR IMMEDIATE RELEASE
HONG KONG - JULY 24, 2020 09:45 AM (EDT)
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” 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 categorises as very strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.
Central Re’s balance sheet strength is underpinned by its robust level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus continued to grow organically, supported by its consistently favourable earnings. Other supportive factors include the company’s prudent investment portfolio, which mainly consists of liquid assets including investment-grade bonds and cash and cash equivalents, as well as the company’s high financial flexibility.
The company has demonstrated a track record of favourable underwriting results in its domestic life and non-life reinsurance businesses over the past five years. Diversified profits sourced from different business segments contribute to stabilise the overall profitability. The large proportion of fixed-income investments continued to deliver a stable stream of interest income to support the overall earnings, although yield remained low. The five-year net combined ratio and return on adjusted capital and surplus were 94.2% and 7.6% (2015-2019), respectively.
Leveraging its long operating history as Taiwan’s sole domestic reinsurer, Central Re maintains solid and long-term relationships with local cedents. Over the past few years, the company has been expanding into overseas markets at robust growth rates. Targeted markets include Europe, the Middle East and Southeast Asia. AM Best expects the company to uphold its prudent underwriting approach and strive for sustainable profitability, and over the intermediate term, to benefit from enhanced diversification in geographies and clientele.
Partially offsetting rating factors include the company’s domestic and overseas catastrophe exposures. For instance, the company reported enlarged underwriting losses arising from its international portfolio due to higher typhoon-related claims over the past couple of years. The company arranges its retrocession programme in accordance with the evolvement of its catastrophe exposures to mitigate any undue risks.
Positive rating actions could occur if the company’s overseas underwriting portfolio demonstrates a sustained and favourable contribution to support the operating performance and business profile. Negative rating actions could occur if the company experiences a sustained and adverse deterioration in its operating performance, or if there is a significant decline in the company’s risk-adjusted capitalisation.
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 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 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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.