A.M. Best Affirms Ratings of South China Insurance Co., Ltd.OLDWICK, N.J. -- A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of South China Insurance Co., Ltd. (South China Insurance) (Taiwan). The outlook for both ratings is stable. The ratings of South China Insurance reflect its supportive level of risk-adjusted capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. , favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. performance, diversity within its distribution network and conservative investment allocation. South China Insurance maintains diversity of its premium source through direct sales, brokers and car dealers. As part of Hua Nan Financial Holdings Co. Ltd, a publicly listed financial conglomerate conglomerate, in business conglomerate, corporation whose asset growth, often very rapid, comes largely through the acquisition of, or merger with, other firms whose products are largely unrelated to each other or to that of the parent company. in Taiwan, South China Insurance is affiliated with Hua Nan Commercial Bank, which provides selling opportunities and economies of scale. The company is well capitalized to support its current ratings. Modest premium leverage ratio and historical operating profitability have contributed to South China Insurance's favorable capital adequacy on a risk-adjusted basis. However, net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. were registered in 2008 due mainly to the tumultuous financial market environment. Looking ahead, A.M. Best expects that South China Insurance's underlying underwriting performance will contribute to generating overall positive earnings, thus resulting in stable surplus growth. The company's risk-adjusted capitalization is likely to remain at an adequate level through 2009, with its prospective business growth and investment risks. South China Insurance maintains a conservative and diversified portfolio of assets. Approximately 77% of invested assets were allocated to bank deposits and government/corporate fixed interest securities as of September 30, 2008. Investment returns largely have contributed to the company's net earnings over the years. However, investment performance deteriorated in the third quarter of 2008 compared to the same period in 2007, driven by realized and unrealized investment losses from equity investments. The primary offsetting rating factor is South China Insurance's potential operating volatility under the current intensified in·ten·si·fy v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: market competition. Further rate deregulation Deregulation The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Notes: Traditional areas that have been deregulated are the telephone and airline industries. through reduction in tariffs in motor and commercial fire businesses will take place in 2009. While continued competitive market conditions may lead to the company's premium production being slowed moderately, South China Insurance's operating profitability could be exposed to potential volatility. Given the unfavorable capital market environment along with increased competition within the local market, the company could be challenged to restore its net earnings momentum in the near term. For Best's Ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. , an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com. |
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