HONG KONG–(BUSINESS WIRE)–AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” (Excellent) to Nan Shan General Insurance Co., Ltd. (Nan Shan General) (Taiwan). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Nan Shan General’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 (ERM).
Nan Shan General was established in 1962. On 1 September 2016, it was fully acquired by Nan Shan Life Insurance Co., Ltd. (Nan Shan Life), which is owned by Ruen Chen Investment Holding Co., Ltd. (Ruen Chen), a Taiwan-based joint venture funded by Ruentex Group (collective stake of 80% of Ruen Chen) and Pou Chen Group (20%).
Nan Shan General’s very strong level of balance sheet strength is underpinned by its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as the protective reinsurance arrangements, the diversified fixed-income oriented investment portfolio and strong liquidity. AM Best expects the company’s BCAR score to exhibit a downward trend over the forecast period as increases in underwriting and investment risks outpace organic growth in capital and surplus due to the moderately high dividend payout ratio. Notwithstanding, the company’s capital position is expected to remain supportive of its current ratings over the short to intermediate term.
Nan Shan General reported positive operating results during 2016 to 2020, with average return-on-equity of 6.6% for the five-year period, based on adjusted capital and surplus. The company’s underwriting margin has exhibited a downward trend over the past few years and remained below the market average, mainly due to an increasing loss ratio in its key voluntary motor business and a higher-than-market average expense ratio due to its small business scale. Conversely, the company’s investment performance continued to benefit from stable streams of interest and dividend income, as well as favourable capital gains in recent years. Going forward, AM Best expects the company’s asset allocation strategy to remain largely stable and generate low yet consistent net investment yields.
The company remains a small player in Taiwan’s non-life insurance market, with a market share of 3.2% based on direct written premium in 2021. Leveraging the distribution support from Nan Shan Life’s life agency force, which contributed 85% of Nan Shan General’s premium revenue in 2020, the company’s underwriting portfolio consists of a high proportion of personal line products, in particular voluntary motor. Going forward, the company plans to increase its premium retention actively in this product line.
Positive rating actions are unlikely over the short to intermediate term. Negative rating actions could occur if there is a material decline in the company’s risk-adjusted capitalisation, for example, due to a much faster-than-expected expansion in asset or underwriting risks. Negative rating actions also could occur if there is a sustained deterioration in the company’s operating performance, for example, due to an adverse underwriting margin in its key product line of voluntary motor.
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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