HONG KONG--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” (Good) to CTBC Insurance Company Limited (CTBC Insurance) (Taiwan). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect CTBC Insurance’s balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings also reflect the parental support CTBC Insurance receives from its intermediate parent, Taiwan Life Insurance Company Limited (Taiwan Life), as well as its ultimate parent, CTBC Financial Holding Company Limited (CTBC Holding), in terms of capital, business development and risk management. CTBC Insurance is a non-life insurance company established in 2006 as a wholly owned subsidiary of Taiwan Life, a life insurance company with a long operating history. Taiwan Life is wholly owned by CTBC Holding, which is deemed as the ultimate parent of CTBC Insurance.
CTBC Insurance’s balance sheet strength assessment reflects its strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The assessment also reflects the company’s appropriate reinsurance programme, which is comprised of highly rated reinsurers and capital support from shareholders. However, these are partially offset by CTBC Insurance’s small absolute size of capital and exposure to potential catastrophe losses. Moreover, the company’s investment strategy remains conservative with the majority of the portfolio invested in low-risk assets, including cash and fixed-income securities.
CTBC Insurance’s capital and surplus has largely been restored to pre-pandemic levels as of the first half of 2024, owing to multiple rounds of capital injections that totalled TWD 20.5 billion provided by Taiwan Life. The company’s capital position came under significant pressure due to pandemic-related losses in 2022 and 2023; and based on the company’s business plan, AM Best expects CTBC Insurance to maintain its level of risk-adjusted capitalisation over the short to intermediate term, supported by full retention of earnings.
AM Best views CTBC Insurance’s operating performance as marginal. CTBC Insurance reported positive operating results in 2023, after sustaining losses for four consecutive years since 2019. The company’s historical profitability was adversely impacted by material pandemic insurance losses in 2022, and unprofitable underwriting results in the traditional product lines partially attributed to high expenses relative to the small premium scale. The company continues to make efforts to improve technical results by underwriting initiatives through refined risk selection and controlled risk appetite. Going forward, AM Best expects CTBC Insurance’s overall operating results to improve supported by profitable personal lines of business and consistent investment performance, with potential volatility from commercial lines.
CTBC Insurance’s market presence remains limited in Taiwan’s non-life insurance segment, a well-developed and competitive marketplace. The company attained a 1.1% market share of gross premiums written (GPW) in 2023 and ranked 14th in the non-life segment. The company’s underwriting portfolio is diversified. Voluntary motor remains its largest product line and revenue driver. This line, together with major commercial fire and liability products, has continued to post faster-than-average premium growth rates in recent years. The company targets to strengthen its business with digital channel partners as a way to expand its personal lines business.
CTBC Insurance has strengthened its underwriting control and channel management capabilities, following its large pandemic-related insurance losses. Dedicated underwriting guidelines for high-risk products have been developed and implemented. Sales limits are monitored and controlled through enhanced policy management systems and are communicated with distribution channels and internal business units regularly. The new senior management team is seasoned and has a proven track record from their past work experience in the industry. The company’s ERM is assessed as appropriate.
CTBC Insurance has been a beneficiary of parental supports from Taiwan Life and CTBC Holding. The company shares the well-recognized brand name and leverages on the distribution capabilities of Taiwan Life’s tied agent team and CTBC Bank’s bancassurance channel. Going forward, AM Best expects the company to benefit from potential synergies on cross-selling and continued supports in terms of capitalisation, risk management and operations.
Negative rating actions could occur if there is a material decline in CTBC Insurance’s risk-adjusted capitalisation, due to a much faster-than-expected expansion in underwriting that outpaces its growth in capital and surplus, or the company experiences large claims or catastrophe losses that significantly erode its capital strength. Positive rating actions could occur if CTBC Insurance successfully realizes its business plan and demonstrates sustainable improvement in operating performance while maintaining the appropriate ERM assessment. Negative rating actions also could occur if Taiwan Life, experiences a significant deterioration in its credit fundamentals, which AM Best would view as having a material negative impact on CTBC Insurance.
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