Fitch Affirms Union Insurance at IFS 'A-'; Outlook Stable

Union Insurance Co

18/02/2016 06:32

(The following statement was released by the rating agency)

HONG KONG, February 18 (Fitch) Fitch Ratings has affirmed Taiwan-based Union 
Insurance Company's (Union) Insurer Financial Strength (IFS) Rating at 'A-' and 
its National IFS Rating at 'AA(twn)'. The Outlook is Stable.

KEY RATING DRIVERS

The affirmation reflects Union's consistently strong capitalisation, prudent 
insurance underwriting practices and liquid balance sheet. The company's 
moderate franchise is the key rating constraint.

Union's statutory risk-based capital ratio was sound at above 300% at end-1H15, 
compared with the regulatory minimum of 200%. Its capital position provides a 
strong buffer against adverse reserve developments, particularly in view of its 
low underwriting leverage with net written premiums/adjusted shareholders' 
surplus (including shareholders' fund and claims equalisation reserve) of around 
1x from 2011-9M15.

Investments remain prudent and liquid, with cash and cash equivalents accounting 
for 72.3% of invested assets at end-9M15, comfortably supporting its insurance 
claims. Credit quality in fixed-income portfolios remained sound as they were 
mainly government bonds. The company reduced its equity exposures to only 3.4% 
of shareholders' equity at end-9M15 amid heightened market volatility.

Union's annualised return on average equity (ROAE) was steady at 3.9% in 9M15 
(3.3% in 2014) as weaker investment performance offset the impact of an improved 
underwriting result. The combined ratio decreased to 94% in 9M15 from 103% in 
2014.

RATING SENSITIVITIES

An upgrade is unlikely in the near to medium future because of Union's modest 
market position and business scale. Deterioration in underwriting performance 
with combined ratio persistently above 103% or substantial underwriting or 
investment losses resulting in a fall in Union's statutory capital ratio to 
below 300%, on a sustained basis, are key triggers for a rating downgrade.

Contact: 

Primary Analyst

Joyce Huang, CFA

Director 

+852 2263 9595

Fitch (Hong Kong) Limited 

19/F Man Yee Building

68 Des Voeux Road Central, Hong Kong

Secondary Analyst

Jeffrey Liew

Senior Director

+852 2263 9939 

Committee Chairperson

Chris Waterman

Managing Director

+44 20 3530 1168 

Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: 
wailun.wan@fitchratings.com.

Additional information is available on www.fitchratings.com

Applicable Criteria 

Insurance Rating Methodology (pub. 16 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures 

Dodd-Frank Rating Information Disclosure Form 

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr 
_id=999622

Solicitation Status 

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=999622

Endorsement Policy 

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det 
ail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: 
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING 
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S 
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND 
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF 
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE 
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF 
CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE 
SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS 
SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED 
ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH 
WEBSITE