AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Central Reinsurance Corporation (Central Re) (Taiwan). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Central Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.

Central Re’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level at year-end 2024. Benefitting from retained operating profits, the company’s adjusted capital and surplus (C&S) increased by 8.9% to TWD 22.7 billion in 2024. The company’s investment strategy remains prudent, with a majority of its portfolio allocated to diversified and liquid securities, including investment-grade bonds, and cash and cash equivalents. AM Best expects the company’s BCAR to remain solid and supportive of the balance sheet strength assessment over the short to intermediate term.

Central Re’s reported net profit improved to TWD 2.5 billion in 2024, while the five-year return on equity, based on adjusted C&S, was 8.0% during 2020 to 2024. The company’s domestic non-life business shrank moderately during the year, mainly due to the reduced voluntary motor business, while the underwriting margin narrowed due to higher claims from some major catastrophe events during the year. Central Re’s overseas business top line also declined as the company proactively revamped the portfolio with an aim to improve business quality. Notwithstanding, the domestic life business continued to deliver a solid stream of earnings and support the overall underwriting results. Investment results benefitted from stable investment income from the fixed-income assets and dividend income, while fluctuations in currency exchange rates have added volatility to the investment results over the past few years.

As the sole domestic reinsurer in Taiwan with a long operating history, Central Re continues to benefit from solid and long-term relationships with local cedants. The company encountered a modest decline in domestic market share in recent years, given that its portfolio skews toward personal lines, while the local market saw more robust growth in commercial lines. However, AM Best anticipates that Central Re’s domestic market leadership in both life and non-life reinsurance segments will remain unchallenged over the medium term. As mentioned, the company has reined in the growth pace of its overseas business over the past few years, which generated approximately one-fifth of its total gross premium written in 2024. AM Best expects Central Re to uphold its prudent underwriting approach and strive for sustainable profitability, and over the intermediate term, benefit from the enhanced diversification in both its geography and clientele.

Negative rating actions could occur if there is a significant decline in Central Re’s risk-adjusted capitalisation, for example, due to unexpected large underwriting or investment losses. Negative rating actions could arise if the company’s business profile exhibits a sustained diminishing trend that materially deviates from its indicated plans and weakens its competitive position in the domestic market. Positive rating actions could occur if Central Re’s domestic and overseas underwriting portfolios demonstrate sustained and favourable results to strengthen its overall operating performance, while supporting its current business profile.

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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