Taiwan Ratings Corp (中華信評) yesterday placed Prudential Life Insurance Inc’s local unit under credit watch with negative implications, as the US-based group considers re-evaluating its global business strategy and selling the Taiwanese subsidiary.
The adjustment came after Taiwan Ratings, the local arm of Standard & Poor’s Global Ratings, called into question the credit profile and strength of Prudential Life Insurance Co of Taiwan (保德信人壽), if it were to no longer receive support from its parent company.
“The [credit watch] placement reflects the increasing uncertainty over Prudential Taiwan’s creditworthiness given our view that the US-based parent group may re-evaluate the strategic importance and ownership structure of the Taiwan subsidiary,” Taiwan Ratings said in a note.
The re-evaluation could lead to a change in Taiwan’s strategic position and a potential disposal, it said.
“We therefore place Prudential Taiwan on credit watch with negative implications,” it said.
The local unit is currently assigned a long-term issuer credit rating of “twAAA.”
Taiwan Ratings said it would resolve the credit watch placement after analyzing the impact of any change in its status.
The agency might lower its rating by one or more notches if it sees a greater possibility that the group would pull out of the Taiwanese market, thereby weakening the local unit’s ties with the US headquarters, it added.
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DOWNSIDE RISKS: Firms have a ‘very low’ chance of boosting investment returns in the next two years, making it hard for them to improve their capitalization, an analyst said Taiwanese life insurers wanting to improve their capital structure face strong headwinds this year, given prolonged low interest rates and economic impacts derived from trade protectionism and the COVID-19 pandemic, Taiwan Ratings Corp (中華信評) said on Friday. The local life insurance sector also still has high asset risks and such risks are susceptible to market volatility, the local arm of Standard & Poor’s Global Ratings said. Since last year, major financial holding companies — including CTBC Financial Holding Co (中信金控), Cathay Financial Holding Co (國泰金控) and Shin Kong Financial Holding Co (新光金控) — have announced plans to raise fresh capital to