3rd biggest non-life insurer’s long-term ICR outlook turns ‘Positive’

Overall, Shinkong Insurance Company’s underwriting profitability and return on equity have consistently outperformed the industry average over the past five years, AM Best said.

The global credit rating agency has revised the outlook to ‘Ppositive ‘from’stable’ for Shinkong’s Long-Term Issuer Credit Rating (Long-Term ICR). It also has affirmed the insurer’s Financial Strength Rating (FSR) of ‘A’ (Excellent) and the Long-Term ICR of ‘The’ (Excellent). The outlook of the FSR is ‘stable’.

AM Best says that the credit ratings reflect Shinkong’s balance sheet strength, which the agency assesses as very strong, as well as the insurance company’s adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Financial performance

The positive Long-Term ICR outlook reflects Shinkong’s consistently profitable operating performance amid a challenging operating environment over the past few years, partially attributed to the COVID-19 pandemic and capital market volatility.

The company has benefited from its prudent underwriting strategy, favorable claims experience and disciplined expense management. Pandemic-related insurance losses were limited.

Shinkong also reported improved investment results in 2023 as interest and dividend income remained stable, while capital losses shrank materially during the year. Overall, the company’s underwriting profitability and return on equity have consistently outperformed the industry average over the past five years.

Shinkong’s risk-adjusted capitalization remains at the strongest level, as measured by Best’s Capital Adequacy Ratio. The company’s capital and surplus recorded double-digit growth in 2023, mainly driven by positive operating results, despite being partially offset by a dividend payment. Shinkong’s investment portfolio has been liquid and stable with the majority of these assets held in cash and investment-grade bonds.

The company’s reinsurance dependency remains moderate and is placed with reinsurance panels of good credit quality. Its risk-based capital ratio also remains at a healthy level.

Business profile

Shinkong is the third-largest insurer in Taiwan’s non-life insurance market based on gross premiums written. The company’s underwriting portfolio has been moderately diversified with a majority of its business in motor. Its distribution channel mix remains stable with its direct channel continuing to be the largest contributor.

As for its pandemic-related insurance product, Shinkong has demonstrated prudent ERM practices on product development and a high level of control in product distribution.