Fitch Ratings has revised the outlook for Taiwan Life Insurance’s Insurer Financial Strength Rating (IFS) from “Positive” to “Stable”, to reflect the expectations of global credit rating agency, Taiwan Life. will maintain the improvement in its operating results and a solid capital cushion given its asset management strategy and its product mix.
Taiwan Life, which ranks among the top five life insurers on the island, also has its IFS rating confirmed at “BBB+” (good) and the national IFS rating at “AA-(twn)” by Fitch. The rating affirmation reflects Taiwan Life’s “good” financial performance and capitalization, as well as “favorable” business profile, according to the agency.
Taiwan Life’s financial performance is considered “good” as its return on equity averaged 14% from 2019 to 2021, supported by mortality and morbidity gains and investment performance, Fitch notes.
Global credit rating agency Fitch believes the negative impact on earnings from COVID-19 policy-related claims will be manageable. The duration gap between Taiwan Life’s assets and liabilities has narrowed, reaching a moderate level of less than two years at the end of 2021. Fitch expects Taiwan Life to closely monitor its duration gap to minimize interest rate risk.
Fitch expects Taiwan Life to maintain “good” capital reserves to support its business expansion. Its risk-based capital ratio was 342% at the end of 2021. Its capital score, measured by Fitch’s Prism model, improved from “Strong” at the end of 2021 to “Adequate” at the end of 2020, supported by in-force business value growth and various loss-absorbing reserves.
The company’s leverage ratio was 9% at the end of 2021, below the ratio guidelines for insurers rated IFS “BBB”. Fitch expects Taiwan Life’s parent company, CTBC Financial Holding, to provide capital support if needed.
Taiwan Life’s asset risk also declined due to equity growth and lower investment grade bonds in its portfolio. Risky assets, including listed and unlisted equities, equity-type mutual funds, preferred stocks and below-investment grade bonds, accounted for 143% of capital and reserves at end-2021 (end-2020 : 154%), within the ratio range guideline for a life insurer rated IFS ‘BBB’.
Fitch rated Taiwan Life’s business profile as “favorable” compared to those of all other life insurance companies in the market due to its “favorable” scale of operation, distribution channels and well-diversified product ranges, its substantial commercial franchise and its “moderate/favourable”. corporate governance. The ranking results in Fitch rating Taiwan Life’s business profile at “a-” in accordance with its Credit Factor Rating Guidelines.