HONG KONG--(BUSINESS WIRE)--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 categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.
AM Best expects Central Re’s risk-adjusted capitalization to remain at a robust level and supportive of its ongoing business expansion. Accumulation of retained earnings continue to strengthen the company’s capital position while its prudent investment strategy, strong liquidity and high financial flexibility also contribute to its overall balance sheet strength.
The company has demonstrated a track record of favorable underwriting results over the past five years, attributed to improving profitability in the domestic non-life reinsurance segment and its consistently positive results in the life reinsurance segment. Profits from its different business segments also helped to lower the overall underwriting volatility, including from the international book of business. The company’s large investment asset allocation to fixed-income securities continued to deliver a stable stream of interest income, despite the yield remaining low. Reduction in equity exposure also contributed to partially lower investment volatility during the year.
Leveraging its long operating history as Taiwan’s sole domestic reinsurer, Central Re has built solid and long-term relationships with its local cedants. Apart from enhancing its strong market position in the domestic life and non-life reinsurance segments, the company is trying to diversify its geographical and client coverage by expanding into other overseas markets such as Europe and the Middle East. AM Best expects the company to uphold its prudent underwriting approach and strive for sustainable profitability.
Offsetting rating factors include potential volatility in earnings and capital and surplus, arising from Central Re’s domestic and overseas catastrophe exposures. The company has arranged a comprehensive retrocession program to mitigate the undue risks. Risk selection amid competitive pricing conditions in congested reinsurance markets continues to pose challenges to the operating environment.
While Central Re is well-positioned at current rating levels, negative rating actions could occur if there is a significant decline in the company’s risk-adjusted capitalization, or if the company experiences sustained and adverse deterioration in its operating performance.
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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