AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Union Insurance Company Limited (Union) (Taiwan). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Union’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.

The company’s balance sheet strength is supported by its risk-adjusted capitalisation, which remained at the strongest level in 2023, as measured by Best’s Capital Adequacy Ratio (BCAR). Union’s adjusted capital and surplus has largely been restored to pre-COVID-19 pandemic levels. This result was driven by significantly improved operating performance with full profit retention, and reserve releases related to pandemic insurance policies. The company’s pandemic insurance losses largely settled in the first half of 2023, which should allow Union’s capital position to grow through organic capital generation and profit retentions over the short to intermediate term.

Union’s investment portfolio has remained liquid and diversified, with the majority of assets invested in cash and domestic investment grade bonds. The company’s reinsurance programme is placed with a reinsurer panel of good credit quality that remains in place despite industry-wide reinsurance rate hikes. The company’s risk-based capital ratio remains at a healthy level.

Union reported materially improved operating results in 2023, driven by a recovery in underwriting profitability to pre-pandemic levels, and the release of reserve provisions for pandemic insurance claims. Gross premiums written increased moderately, mainly supported by growth in commercial lines and non-motor personal lines. Voluntary motor is the company’s largest line of business and has a stable loss ratio. Union also has booked stronger investment results with the highest net investment yield (including capital gains and losses) over the past five years. AM Best views the improved operating performance as partly due to a one-off reserve provisions release, and Union is expected to deliver positive results through traditional lines underwriting and investment income over the intermediate term.

Union is a medium-sized player in Taiwan’s non-life insurance market and ranked eighth in 2023, based on direct premiums written. Similar to other companies in the market, Union’s underwriting portfolio is diversified moderately but slightly skewed toward the motor business, with its other major business lines being the fire and accident business. The company has maintained a diversified distribution channel mix, with major business contributors being car dealers, the direct channel and brokers.

Negative rating actions could occur if there is a significant decline in Union’s risk-adjusted capitalisation. While the company is well-positioned at its current rating levels, positive rating actions could occur if Union exhibits sustained improvements in operating performance over the intermediate term while maintaining its current balance sheet strength assessment level.

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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