Nan Shan Life Insurance has the same capacity to meet its obligations denominated in both local currency and foreign currency, says S&P Global Ratings (S&P).
Reflecting this, the credit rating agency has assigned its 'BBB+' foreign currency long-term issuer credit rating and financial strength rating on Nan Shan Life. At the same time, it affirmed its 'BBB+' local currency long-term issuer credit rating and financial strength rating on Nan Shan Life.
The outlook on the long-term ratings is ‘Stable’ to reflect S&P’s view that the agency will maintain its satisfactory capital and earnings assessment for Nan Shan Life over the next two years.
As of end June 2024, the life insurer's overseas investment assets account for about 75% of its total investments. These are mostly highly liquid high-grade fixed income assets denominated in US dollars.
Outlook
The ‘Stable’ rating outlook reflects S&P’s expectation that Nan Shan Life's capital and earnings will remain satisfactory over the next two years, supported by moderate premium growth focusing on long-tenor, protection-type products.
In addition, S&P believes Nan Shan Life will maintain its investment risk exposure over the next two years. The agency expects the insurer to achieve this through close monitoring and proactive risk controls, amid volatile market conditions. S&P anticipates no structural change in Nan Shan Life's investment mix over the same period, despite the potential for a slight increase in equity holdings.
S&P also expects Nan Shan Life to remain independent of its two main shareholders—Taiwan-based Ruentex and Pou Chen Corp groups —under Taiwan's strict regulatory framework for the financial services sector.
S&P says that it may lower the ratings on Nan Shan Life if:
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The insurer adopts an aggressive business growth strategy or investment risk appetite which causes its capitalization to fall below our assessment of satisfactory over the next two years; or
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S&P lowers its assessment of Nan Shan Life's competitive strength.
S&P says that it may raise the ratings on Nan Shan Life if:
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it raises its assessment of the insurer's capital and earnings to strong from satisfactory presently. This could occur if Nan Shan Life adopts a prudent business growth and investment appetite, or records higher value of in-force than S&P forecasts, possibly through the sale of more value-added products; or
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it raises its assessment of the life insurer’s investment risk profile, possibly through improved foreign exchange risk exposure or investment leverage to become comparable with regional peers via a prudent risk appetite and risk controls.
In both scenarios, the insurer would also need to demonstrate that its competitive strength, such as business momentum and product comprehensiveness, is comparable with similarly rated domestic peers.