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

JANUARY 09, 2025 08:39 AM (EST)

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

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FOR IMMEDIATE RELEASE

HONG KONG - JANUARY 09, 2025 08:39 AM (EST)
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 2023, 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, expanded by 23% to TWD 8,458 million (USD 277 million) in 2023. The rebound was contributed by the recovery of unrealised capital losses through other comprehensive income and full retention of net profit, while its statutory solvency ratio stood at a healthy level. The company's adjusted capital and surplus grew further during the first nine months of 2024. South China Insurance's investment portfolio remains liquid and diversified with a majority of its assets held in investment grade bonds and cash, and it continues to manage currency risk in the investment portfolio through currency hedging. AM Best expects the company's BCAR and balance sheet strength will stay supportive of its current ratings over the short to intermediate term.

South China Insurance has maintained profitability over the last few years, with a five-year average return-on-equity ratio of 8.6% (2019-2023). During 2023, the company reported a net profit after tax of TWD 916 million, due to improvements in both underwriting and investment earnings. The company further achieved a reported profit after tax of TWD 1,181 million during the first three quarters of 2024. South China Insurance reported a high single-digit growth in gross premiums written in 2023, supported by motor and commercial fire products. The company's underwriting results improved in 2023, due to the decline in the loss ratio for major business lines, including motor and fire. South China Insurance's investment results kept being supported by stable streams of interest and dividend income generated from its investment portfolio in 2023, and the first three quarters of 2024.

South China Insurance is a medium-sized insurer in Taiwan's non-life market. The company's underwriting portfolio is moderately diversified with motor dominating its business, followed by fire, casualty, and personal accident and health insurances. 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.

Negative rating actions could occur if there is a material decline in South China Insurance's risk-adjusted capitalisation, for example, due to unexpected large underwriting or investment losses. Negative rating actions also could arise if there is a continued deteriorating trend or an increased level of adverse volatility in the company's operating performance. Although the likelihood is relatively low, positive rating actions could occur if South China Insurance achieves sustained improvement and stability in its operating performance while maintaining a robust level of 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 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.