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A.M. Best Assigns Credit Ratings to Union Insurance Company Limited
[June 08, 2018]

A.M. Best Assigns Credit Ratings to Union Insurance Company Limited

A.M. Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of "a-" to Union Insurance Company Limited (Union) (Taiwan). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Union's balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Union's risk-adjusted capitalization benefits from earnings retention and prudent reinsurance arrangements. The company is debt-free and publicly traded, which enhances its financial flexibility and supports the overall very strong balance sheet strength. Union has delivered positive operating results over the past five years, partially attributed to favorable claims experience in the voluntary motor line, and a steady stream of investment income from interest and real estate. Notwithstanding, the company's expense ratio exhibits a stable yet high trend due to economies of scale and a high proportion of personal lines business. Overall operating performance is in line with the industry. As a mid-sized player with the sixth-largest market share in Taiwan's non-life segment, Union's underwriting portfolio focuses on personal lines products. The company aims to expand its commercial book of business gradually as a new growth source.

Offsetting rating factors include the anticipated increase in the company's investment risk exposure in 2018, which could exert some downward pressure on its risk-adjusted capitalization and give rise to higher investment earnings volatility. Moreover, the historical underwriting losses in compulsory motor insurance reduced the respective special reserves to a marginal level in 2017. In the short term, this could lead to a shortfall in reserves, and negatively impact the company's operating profitability.

While positive rating actions are not likely, negative rating actions could occur if the company experiences significant and sustained deterioration in its operating performance or if there is a significant decline in risk-adjusted capitalization.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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