A.M. Best Affirms Ratings of Central Reinsurance Corporation

A.M. Best has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Central Reinsurance Corporation (Central Re) (Taiwan). The outlook for both ratings is stable.

The rating affirmations reflect the company’s adequate risk-adjusted capitalization, driven by the continued retention of operating earnings, and its long-established leading position in the non-life and life domestic reinsurance market in Taiwan.

Central Re’s positive operating results were derived from stabilization following the Thailand flood losses, along with the absence of severe catastrophic losses in 2013. Furthermore, the robust growth in yearly renewable-term (YRT) life business contributed favorably to underwriting results during the year. The company also continues to achieve positive investment return under its conservative investment strategy, in which the weighting of fixed income investments has gradually increased over the past few years.

Partially offsetting these positive rating factors include the challenges Central Re faces in business expansion amid an abundance of capacity currently available in the reinsurance market. Stagnant growth in the domestic market has caused direct insurers to increase their premium retention and reduce general reinsurance demand. The company’s risk-adjusted capitalization continues to be exposed to potential material event losses over the medium term given its moderate level of capital buffer.

While the outlook for Central Re’s ratings is stable, negative rating actions could occur if operating results exhibit continued downward pressure or prospective risk-adjusted capitalization materially deteriorates.

The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.