AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) for Central Reinsurance Corporation (Central Re) (Taiwan). The outlook for these credit ratings remains stable.
The affirmation of these ratings reflects Central Re’s very strong balance sheet, adequate operating performance, favorable business profile, and appropriate enterprise risk management, as assessed by AM Best.
At the end of 2023, Central Re’s risk-adjusted capitalization, measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level. The company’s adjusted capital and surplus increased by 10% to TWD 21 billion, supported by the organic accumulation of operating profits. Factors contributing to the assessment of balance sheet strength include Central Re’s prudent investment strategy, comprehensive retrocession arrangement, and high financial flexibility. The investment portfolio remains diversified and liquid, with most assets invested in cash and investment-grade bonds. Moving forward, AM Best expects Central Re to maintain a prudent investment strategy, focusing on low-risk, fixed-income investments.
Central Re reported a net profit of TWD 2.1 billion in 2023, with a five-year return on equity of 7% (2019–2023) based on adjusted capital and surplus. The company’s domestic non-life business showed recovery-driven growth in 2023 after pandemic-related losses in the prior year. Meanwhile, its domestic life business continued to generate solid earnings. The overseas business reported modest profits in 2023, with underwriting performance partially impacted by some catastrophe losses. Investment results benefitted from stable income from fixed-income assets and dividend income, although fluctuations in currency exchange rates have added volatility over the last few years.
Leveraging its long operating history as Taiwan’s sole domestic reinsurer, Central Re continues to benefit from solid and long-term relationships with local cedants, according to AM Best. Despite a modest decline in domestic market share in recent years due to a portfolio skewed towards personal lines, Central Re’s leadership in both life and non-life reinsurance segments is expected to remain unchallenged over the medium term. The company has moderately expanded its overseas business in recent years, contributing about one-fifth of its overall underwriting portfolio at year-end 2023. AM Best anticipates Central Re will uphold its prudent underwriting approach and strive for sustainable profitability, benefiting from enhanced diversification in both geography and clientele.
Negative rating actions could occur if Central Re experiences a significant decline in risk-adjusted capitalization due to unexpected large underwriting or investment losses. Additionally, a sustained diminishing trend in the company’s business profile could lead to negative rating actions. Conversely, positive rating actions could be expected if Central Re’s domestic and overseas underwriting portfolios demonstrate sustained and favorable results, strengthening its overall operating performance while supporting its current business profile.
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