AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a" 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 categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
AM Best expects South China Insurance’s risk-adjusted capitalization to remain robust and supportive of its risk profile over the short to intermediate term. The company’s capital and surplus has strengthened gradually over the past five years through earnings retention and the accumulation of special reserves. Other factors supporting the company’s balance sheet strength include its prudent investment strategy and reserving practice, as well as its comprehensive reinsurance arrangements.
South China Insurance has reported profitable underwriting results consistently over the past five years. The company’s combined ratio was among the lowest in Taiwan’s insurance industry in 2018, underpinned by its good control of operating expenses and favorable claims experience during the year, in particular in the motor and fire lines. Notwithstanding, AM Best expects the company’s underwriting profitability to be at a more subdued level in 2019 due to the continued intense market competition. In terms of investments, the company continued to benefit from a growing stream of investment income, supported by increased allocations to higher-yielding overseas fixed-income securities and domestic preference shares.
South China Insurance remains a mid-sized insurer in Taiwan’s non-life market and has continued to diversify its underwriting portfolio through a multi-channel distribution strategy. While overall premium income has experienced lower-than-average growth rates in recent years, relatively stronger momentum in the casualty and accident and health lines has lowered the company’s concentration in motor business.
Partially offsetting rating factors include the continued competitive domestic market and upward pressure on acquisition expenses.
Positive rating actions are unlikely over the near term. Negative rating actions may occur if there is a material decline in the company’s risk-adjusted capitalization, or if there is a continued deteriorating trend in its operating performance leading to diminished competitive edge over market average.
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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