Fitch Assigns Chubb Life Insurance Taiwan ‘AA-(twn)’ First-Time National IFS Rating; Outlook Stable

Fitch Ratings has assigned Chubb Life Insurance Taiwan Company (CLITC) a National Insurer Financial Strength Rating (IFS) of ‘AA-(twn)’ with a Stable Outlook.

The rating reflects its moderate company profile and good financial performance, supported by sound capitalisation on a consolidated pro forma basis. The rating also takes into consideration the challenges it faces in further developing its business presence and operating performance as a merged entity against intense market competition.

Key Rating Drivers

Ratings Reflect Parental Support: CLITC’s IFS Rating is driven by the consolidated pro forma financials of Cigna Taiwan Life Assurance Company Ltd (CTL) and Chubb Tempest Reinsurance, Taiwan Branch (CTR). CLITC was formed on 1 December 2022 from the merger of CTL and CTR, and 100% owned by Chubb Limited (Chubb, Long-Term Issuer Default Rating: A+/Stable).

In terms of strategic importance, Fitch evaluates CLITC as a ‘Very Important’ member of Chubb, as it benefits from ownership and strategic linkages with Chubb. Chubb’s acquisition of CTL is complementary to the group’s business expansion strategy in the Asia-Pacific region, one of the key growth areas for the group. We therefore expect Chubb to support CLITC’s financial needs, strategic plans and business growth, where needed.

Moderate Company Profile: Fitch assesses the consolidated CLITC company profile as ‘Moderate’ compared with that of all other Taiwanese life insurers. It also has a ‘Moderate’ business risk profile, ‘Somewhat Diversified’ business portfolio and ‘Moderate/Favourable’ corporate governance ranking.

Mid-Sized Insurer: Fitch estimates CLITC is the 12th-largest life insurer in Taiwan, with a market share of around 2% by the consolidated premium income of CTL and CTR in 2021 and 9M22. Fitch expects the merged operation to provide a wider, complementary range of products, combining CTL’s health and accident product expertise with CTR’s investment-linked product focus. It will also maintain somewhat diversified distribution channels, with reliance on bancassurance, telemarketing and broker channels, on a consolidated basis.

Investment-Linked Business Dominates: CLITC’s pro forma return on equity (ROE) on an annualised basis amounted to 3.8% for 2022. Its pro forma business mix by premium comprises mainly investment-linked (78%), health (13%) and personal accident (7%) products on a consolidated basis. We expect CLITC to be challenged to improve its operational stability and profitability, given its dominant investment-linked business focus, and its newly merged operations amid a highly competitive operating environment.

Healthy Capitalisation: Fitch believes its capital is commensurate with its company profile. The insurer has no exposure to financial debt, with no plans to issue debt in the short term. We expect the company to maintain its regulatory risk-based capital (RBC) ratio with an appropriate buffer well in excess of the regulatory minimum of 200%. CTR’s regulatory RBC ratio was 352% and CTL’s was 733% at end-June 2022.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Change in Fitch’s perception of strategic importance and parental support for CLITC;

A significant deterioration in its profitability, with its ROE consistently falling below 2%;

Persistent weakening in the company profile in terms of business franchise and operating scale.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

A significant strengthening of the company profile, such as a larger operating scale and more diversification in business offerings and distribution channels;

Improvement in operating profitability, with a stable trend in the value of new business margin.

Date of Relevant Committee

06 January 2023

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

RATING ACTIONS

Entity / Debt

Rating

Chubb Life Insurance Taiwan Company

Natl Ins Fin Str

AA-(twn)

New Rating

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Additional information is available on www.fitchratings.com

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