Nan Shan Life Insurance will maintain its improved capital and earnings over the next two years, supported by its prudent business growth and investment strategy, says S&P Global Ratings (S&P).
The life insurer will maintain its strong competitive position in Taiwan's life insurance sector through its resilient distribution network and proactive product strategy, adds S&P.
A resumption of the sale of investment-linked products in 2024 has returned the insurer to a full product line-up which now makes it comparable to other major players in the Taiwan life sector.
Ratings upgraded
S&P raised its long-term financial strength and issuer credit ratings on Nan Shan Life to 'A-' from 'BBB+'. The outlook on the ratings is ‘Stable”.
S&P believes the insurer now has sufficient capital adequacy under its substantial stress scenario (99.8% confidence level) compared with S&P’s previous view of capital adequacy under a moderate stress scenario (99.5% confidence level). Moderate premium growth focusing on long-tenor, protection-type products has underpinned this improvement.
In addition, S&P acknowledges the support of favourable equity market conditions and the insurer's full earnings retention in helping Nan Shan Life to accumulate total adjusted capital over the past two years.
Investments
Equity exposure has declined under the insurer's more prudent investment strategy since 2022. S&P assesses Nan Shan Life's equity exposure at about 11% of its total invested assets as of mid-2024, down from 14% at the end of 2021. The proportion of equities held in the investment portfolio has also remained flat over the past few quarters.
S&P believes Nan Shan Life will keep its investment risk exposure relatively unchanged through close monitoring and proactive risk control amid volatile market conditions. S&P anticipates no structural change in the investment mix over the next two years.
Maintaining capital
The insurer's more prudent business growth and investment appetite are in line with its strategy to reserve more capital in preparation for its migration to the new International Financial Reporting Standard 17 and Insurance Capital Standard in 2026. These measures can also help maintain its capital and earnings at the same level over the next two years, in S&P’s view. The insurer's higher foreign exchange risk exposure by local peer standards somewhat offsets its overall satisfactory financial risk profile.
The stable rating outlook reflects S&P’s view that Nan Shan Life will maintain its capital and earnings and accordingly a satisfactory financial risk profile over the next two years. Moderate premium growth with a focus on long-tenor, protection-type products will underpin its stable capital and earnings.
In addition, S&P anticipates the insurer's operations will remain independent of its two main shareholders--Taiwan-based Ruentex and Pou Chen Corp. groups--under Taiwan's regulatory framework for the financial service sector.