AM Best has assigned a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of "a" (Excellent) to Cathay Century Insurance Company Limited (Cathay Century) (Taiwan). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Cathay Century’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.
Cathay Century’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), was at the strongest level in 2020. The company has been strengthening its adjusted capital and surplus over the past years, with a five-year compounded average growth rate at 10.6%, mainly contributed by partial profit retention and the accumulation of special reserves. The company’s investment strategy remains stable and conservative, with a majority of its invested assets in low-risk fixed income securities. The company also has arranged a comprehensive reinsurance programme with a reinsurer panel of good credit quality to mitigate undue underwriting risk, including catastrophe exposure.
Cathay Century’s operating results have remained stable and positive over the past years, supported by positive underwriting and investment results. The company continues to be risk selective and gradually refines its underwriting portfolio. In particular, the improving profitability in its voluntary motor line of business has contributed to offset claims volatility in the accident and health, as well as property lines over the past few years, resulting in a favourable and stable net combined ratio. Despite the volatile investment market in early 2020, the company’s investment results remained positive, contributed by a stable stream of interest and dividend income generated by the company’s investment portfolio.
Cathay Century is the second-largest insurer in Taiwan’s non-life market. The company’s underwriting portfolio is diversified moderately with the majority of its business in motor. The company mainly focuses on personal line products and leverages the parent group’s comprehensive business network in Taiwan, including affiliated life insurance and bank channel, to distribute its products to customers.
Whilst Cathay Century is well-positioned at its current rating level, negative rating actions could occur if the company exhibits a material and sustained deterioration in operating performance, or if there is a substantial decline in its risk-adjusted capitalisation. A change in the credit profile of its parent company, Cathay Financial Holding Co., Ltd., also may pose a negative impact on Cathay Century’s ratings.
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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