HONG KONG–(BUSINESS WIRE)–AM Best affirmed the financial strength rating of A- (Excellent) and the issuer’s long-term credit rating of “a-” (Excellent) of Union Insurance Company Limited (Union) (Taiwan). The outlook for these Credit Ratings (ratings) is stable.
The ratings reflect Union’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.
Union’s risk-adjusted capitalization remains at the highest level, as measured by Best’s capital adequacy ratio (BCAR). The company’s capital has grown organically through partial retention of profits over the past few years, supported by positive operating results. Although the COVID-19 pandemic has continued to develop in Taiwan since April 2022, Union’s loss exposures in COVID-related insurance products are expected to be manageable. Based on the latest information available to AM Best, it does not expect the COVID-19 related claims to cause any major capital erosion of Union’s Adjusted Capital, which includes special liability insurance reserves. car not required.
With respect to Union’s operating performance, claims related to COVID-19 could add near-term underwriting pressure in 2022. Apart from this one-time event, the business’ adequate operating performance remains supported by an average return on five years (2017-2021) on adjusted capital and surplus of 10.7%. In 2021, while the company’s net combined ratio, excluding compulsory motor insurance, remained stable, the company’s net loss ratio deteriorated slightly in 2021, mainly due to a net loss ratio slightly higher in fire and voluntary automobile. The slightly higher net loss ratio was offset by a slight improvement in the company’s net expense ratio and resulted in a stable overall net combined ratio.
Union is a medium-sized player in Taiwan’s non-life insurance market and ranked eighth in 2021 by direct premiums written. Like other market players, the company’s underwriting portfolio is moderately diversified but slightly geared towards the automotive business, with other major business lines in fire and accident business. The company has maintained a diverse distribution channel mix, with major contributors in car dealerships, the direct channel and brokers.
Although Union is well positioned at its current rating levels, negative rating actions could arise in the event of a sustained deterioration in the company’s operating performance or a significant decline in its risk-adjusted capitalization.
Ratings are communicated to rated entities before publication. Unless otherwise indicated, the ratings have not been changed as a result of this communication.
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