Union Insurance Co (友聯產險) yesterday saw its ratings downgraded following sizable write-offs at its four affiliated members, but the insurer insisted business was normal and no customers had canceled policies.
The write-offs, derived from both equity investments and receivables due to Union Insurance, totaled NT$583.9 million (US$17.9 million), according to figures provided by the property insurer.
More than 60 percent of Union Insurance's outstanding shares are controlled by the Rebar Asia Pacific Group (力霸亞太企業集團).
The firm was forced to make the huge write-offs following a series of financial woes at the China Rebar Co (中國力霸), Chia Hsin Food & Synthetic Fiber Co (嘉新食品化纖), The Chinese Bank (中華銀行) and the Greater Chinese Bills Finance Corp (力華票券).
Fitch yesterday lowered its ratings on Union Insurance, with a negative outlook.
It downgraded Union's national insurer financial strength rating to A(twn) from A+(twn) and international rating to BBB- from BBB.
The ratings agency said the impact of write-offs on Union Insurance's capitalization is manageable at the moment.
However, Fitch cautioned that the recent difficulties facing the Rebar Group might potentially have a more significant impact on the property insurer.
"In particular, the agency is concerned to quantify any negative financial impact for Union from loans to and receivables due from related parties and entities that might be exposed to the Rebar Group members in question," the statement read.
Fitch said it was also concerned that the ongoing negative publicity surrounding Union Insurance has the potential to adversely affect the insurer's franchise.
Union Insurance was recently rumored to have lost major customers such as Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) following the parent group's financial problems.
Still, the insurer yesterday clarified that it has not received any request from TSMC, the world's largest made-to-order chipmaker, to transfer its policies to other property insurers.
An official with Union Insurance's fire insurance department said on condition of anonymity yesterday that the firm has only insures 3 percent of TSMC's NT$800 billion (US$24.4 billion) assets and receives NT$28 million in insurance fees per annum from the high-tech company.
The official's remarks came after the Chinese-language Economic Daily News reported that TSMC had withdrawn insurance contracts from Union Insurance.
"We're in the process of finding another insurer to replace Rebar," TSMC spokesman Tzeng Jinn-haw (曾晉皓) said by telephone yesterday. "We have different insurance companies for different policies so the impact of Rebar is very small."
The Union Insurance official said that many corporate clients have made calls to ask about the possible fallout from the insolvency protection requests made by its shareholders and policy holders, Chia Hsin and China Rebar.
Union Insurance is 20.76 percent owned by Chia Hsin and 20.77 percent controlled by China Rebar, according to the company's Web site.
"We have ensured our clients that our operations are stable and they have all chosen to maintain their policies," he said.
Additional reporting by Bloomberg
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