AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Nan Shan General Insurance Co., Ltd. (Nan Shan General) (Taiwan). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Nan Shan General’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 (ERM).

Nan Shan General’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), has significantly improved and is assessed as being at the very strong level as of year-end 2023. The result is underpinned by the capital contribution of TWD 1.5 billion in cash in 2023, from Nan Shan General’s immediate parent, Nan Shan Life Insurance Co., Ltd (Nan Shan Life), to restore Nan Shan General’s capital strength, following the large claims arising from pandemic insurance since 2022. AM Best expects Nan Shan General to maintain its level of risk-adjusted capitalisation over the short to intermediate term. Offsetting factors in the balance sheet strength assessment include the company’s heightened exposure to catastrophe risks in tandem with increased retention levels in its reinsurance arrangements amid rising reinsurance costs, as well as the moderately high historical dividend payout ratio, despite the company not declaring dividends in 2023.

Nan Shan General reported positive operating results in 2023, partially supported by the release of reserves provisions for pandemic insurance claims and positive investment performance. The company’s return on equity has been restored to a high single-digit level. Nan Shan General achieved double-digit growth on gross premiums written in 2023, mainly driven by expansions in voluntary motor, travel insurance and commercial lines. The company has increased premium retention in the major voluntary motor line since 2023, which continues to be a major driver of the overall underwriting results. This product line has exhibited an increasing trend in the loss ratio, while its net commission expense is projected to increase due to reduced reinsurance commission income.

The company’s bond portfolio has continued to contribute stable streams of interest income, which helped to partially offset volatility in equity investments during 2023. AM Best expects Nan Shan General to continue to focus on domestic fixed-income securities and maintain moderate exposure to equity securities with an aim to boost overall investment returns.

Nan Shan General is a wholly owned subsidiary of Nan Shan Life, which is the third-largest life insurance company in Taiwan in terms of total assets. While Nan Shan General’s business scale is small within Nan Shan Life, the company benefits from parental support in terms of the shared brand recognition, strong distribution support and operating and capital commitments.

Negative rating actions could occur if there is a material decline in Nan Shan General’s risk-adjusted capitalisation, for example, due to a much faster-than-expected expansion in underwriting and/or investment risks that outpaces the growth in capital and surplus, or the company experiences large underwriting losses that significantly erode its capital strength. Negative rating actions could also occur if there is a sustained deterioration in the company’s operating performance. Additionally, negative rating actions could occur if Nan Shan Life experiences a significant deterioration in its credit fundamentals, which AM Best views as having a material negative impact on Nan Shan General. Although it is deemed to be unlikely over the short to intermediate term, positive rating actions could occur if the company demonstrates sustainable improvement in operating performance while maintaining the appropriate ERM assessment.

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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