A.M. Best Revises Outlook to Positive for South China Insurance Co. Ltd.

A.M. Best Asia-Pacific Limited has revised the outlook to positive from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of South China Insurance Co. Ltd. (South China Insurance) (Taiwan).

The rating affirmations reflect South China Insurance's consistently sound risk-adjusted capitalization and historically strong operating performance. The change in outlook reflects the company's improved market presence in the Taiwan non-life insurance market and underwriting performance that was more favorable relative to the industry average over the past three years.

South China Insurance had taken continuous efforts to refine its direct distribution strategy and strengthened ties with auto dealers to grow its market share with quality business. The company became the seventh largest of Taiwan's 19 non-life insurance companies with an overall market share of 5.7% of total direct premiums written in 2013. The company was the tenth largest non-life insurer in Taiwan in 2008.

These positive rating factors are partially offset by investment earnings volatility, a relatively small absolute capital base and exposure to natural catastrophes within the region. Growth in capital and surplus was slowed by a historical high dividend payout, although capital adequacy remained strong relative to its overall risk profile over the years. Furthermore, the sustainability of business growth and underwriting profitability continue to be challenged by the increasingly competitive market conditions in Taiwan.

Positive rating actions may occur if South China Insurance can demonstrate continued strong underwriting results in conjunction with capital appreciation and further improvement in its market position. Key drivers that may lead to negative rating actions include a significant deterioration in risk-adjusted capitalization, or the company exhibits a downward trend in underwriting or operating profitability.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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

A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best
Vivian Cheung, [phone]
Financial Analyst
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Moungmo Lee, [phone]
General Manager
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or
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
Senior Manager, Public Relations
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Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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