Fitch Ratings yesterday affirmed Nan Shan Life Insurance Co's (
The rating reflects Nan Shan Life's strong capitalization on a stand-alone basis, its leading position in Taiwan's competitive life sector and the continuing support from parent company American International Group Inc (AIG), the rating firm said.
Nan Shan Life was the nation's second-largest life insurer in terms of in-force premiums as of the end of last year. The insurer's total premium income last year rose by 18.4 percent with its market share growing to 14.3 percent from 14 percent in 2004, according to Fitch.
The company's statutory risk-based capital adequacy ratio has remained comfortably above the regulator's minimum requirement of 200 percent.
The ratings provider deems Nan Shan Life's membership of the AIG group and its increasing focus on product design and distribution important positive factors to drive growth.
However, these factors are partially offset by the negative interest spread problem as Taiwan's prolonged low interest-rate environment has impacted on its old policy types with high guaranteed returns. This has continued to affect current financial performances although the insurer has ceased issuing the old policies, Fitch said.
Meanwhile, Standard & Poor's Ratings Services and subsidiary Taiwan Ratings Corp (中華信評) said the outlook on Taiwan's life insurance industry was stable and industry risk was medium, according to its latest report released on Wednesday.
"Stable economic conditions and improved operational flexibility have enabled domestic insurers to manage themselves more proactively in terms of products, channels, and investments, and to diversify their revenue," said Taiwan Ratings' director Susan Chu (
Yet, Taiwan Ratings expects the industry to register first-year premium growth of less than 10 percent annually over the medium term as the market matures and penetration increases.
Single premiums contributed 30 percent to 40 percent of new business from 2002 to last year, but the contribution is expected to remain highly sensitive to external factors, the ratings agency said.