AM Best Upgrades Credit Ratings of Hotai Insurance Co., Ltd.
ENPNewswire-January 21, 2022--AM Best Upgrades Credit Ratings of Hotai Insurance Co., Ltd
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Release date- 20012022 - AM Best has upgraded the Financial Strength Rating to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating to 'a' (Excellent) from 'a-' (Excellent) of Hotai Insurance Co., Ltd. (Hotai Insurance) (Taiwan).
The outlook of these Credit Ratings (ratings) has been revised to stable from positive.
The ratings reflect Hotai Insurance'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 ratings also reflect the support that the company receives from its ultimate parent, Ho Tai Motor Co., Ltd. (Ho Tai Motor).
The rating upgrades reflect the revision of Hotai Insurance's operating performance assessment from marginal to adequate. The company was acquired in early 2017 by its parent group, Ho Tai Motor, and managed to transform its business successfully, having turned around its underwriting performance to deliver stable underwriting profits since 2018 with lowered expense and combined ratios. Its investment performance also improved in recent years following a moderate increase in investment risk appetite. Hotai Insurance reported an improved return-on-equity (ROE) ratio over the past three years, with 2020 ROE recorded at 7.9%, which supported an adequate operating performance assessment. Going forward, AM Best expects that the company's underwriting performance will continue to align with the industry average, while its bottom line will be highly dependent on its investment performance.
Hotai Insurance's balance sheet strength is supported by its risk-adjusted capitalisation at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). Invested assets remain highly liquid, but the company moderately increased its investment allocation to higher risk assets in recent years, such as listed stocks and exchange traded funds, to enhance yields. An appropriate reinsurance programme has been arranged to protect its capital in tandem with its fast business expansion. Hotai Insurance exhibited a declining solvency ratio in line with its business plan, due to a rapid growth in underwriting leverage and increased asset risk. However, AM Best expects the company's risk-adjusted capitalisation to remain supportive of its very strong...
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