A.M. Best has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and the issuer credit rating to “a” from “a-” of South China Insurance Co., Ltd. (South China Insurance) (Taiwan). The outlook for both ratings has been revised to stable from positive.

The rating upgrades reflect South China Insurance’s sound risk-adjusted capitalization, favorable track record in underwriting and its diversified distribution channels. Over the past five years, the company has demonstrated a consistent track record of favorable underwriting performance and an improving trend in market presence in Taiwan’s non-life insurance segment. The ratings also recognize the company’s improved risk management capability and its stabilized investment results over the past three years.

South China Insurance adopts a successful multi-channel strategy, including direct distribution, agents and brokers, as well as being a secured affiliated channel of Hua Nan Financial Holdings Co., Ltd. South China Insurance has strengthened ties with car dealers in recent years, which has enhanced growth in its voluntary motor line. This has helped the company improve its overall rank in Taiwan’s non-life market to sixth in June 2015, compared with eighth in 2009 according to the Non-Life Insurance Association of the R.O.C.

These positive rating factors are partially offset by exposure to natural catastrophes within the region as business volume increased. Typhoon Soudelor in August 2015 could lead to some volatility in the company’s 2015 underwriting results. Furthermore, the competitive market conditions in Taiwan are expected to continue to challenge the company’s business growth and underwriting profitability.

Positive rating actions are unlikely in the medium term. Negative rating actions may occur if operating performance deteriorates or if there is a decline in the company’s risk-adjusted capitalization.

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

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