AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Hotai Insurance Co., Ltd. (Hotai Insurance) (Taiwan).
The Credit Ratings (ratings) reflect Hotai Insurance’s balance sheet strength, which AM Best categorises as very strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect the support that the company receives from its ultimate parent, Ho Tai Motor Co., Ltd. (Ho Tai Motor).
The revision of the outlooks to positive reflects the overall improving trend in Hotai Insurance’s operating performance. Since being acquired by Ho Tai Motor in early 2017, Hotai Insurance has implemented its business transformation plan successfully. The company has lowered its expense ratio and overall combined ratio, and started reporting underwriting profits since 2018. Going forward, AM Best expects Hotai Insurance’s operating performance to continue to align with the industry average and deliver positive operating results based on its business plan.
Hotai Insurance’s balance sheet strength is supported by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), despite a rapid growth in underwriting leverage and increased asset risk over the past few years. The company has maintained a liquid investment portfolio, and has arranged a comprehensive reinsurance programme to protect its capital and surplus. It has not declared any dividends since its change in ownership and plans to fully retain profits to support its business growth.
Ho Tai Motor has been the number one automotive distributor in Taiwan for the past two decades and leads the market by a reasonable gap from its competitors. Leveraging its long-established relationship with Toyota Motor Corporation, Ho Tai Motor is the key distributor of Toyota vehicles in Taiwan. Ho Tai Motor provides implicit and explicit support to Hotai Insurance in terms of its extensive car dealer network and high-quality motor insurance business, as well as long-term operating and capital commitment in the form of a letter of undertaking. Over the short to intermediate term, AM Best expects that Ho Tai Motor’s fundamental will remain stable and its support to Hotai Insurance will maintain strong.
Positive rating actions could occur if Hotai Insurance continues to demonstrate positive operating performance in line with its business plan while maintaining a supportive level of risk-adjusted capitalisation. Negative rating actions may arise if the company’s operating performance materially and adversely deviates from its business plan. Negative rating actions could occur if a faster-than-expected premium growth or higher-than-expected risk profile leads to a sharp decline in the company’s risk-adjusted capitalisation. Negative rating actions also could occur if there is a material deterioration in Ho Tai Motor’s credit profile, or if the level of support decreases significantly.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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