Hotai Insurance has implemented its business transformation plan successfully since being acquired by Ho Tai Motor which is Taiwan’s biggest automotive distributor, in early 2017, notes AM Best.
The insurance company has lowered its expense ratio and overall combined ratio, and has reported 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.
Outlooks revised to positive
The international credit rating agency has revised the outlooks for the insurer to positive from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-”.
The credit 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.
The revision of the outlooks to positive reflects the overall improving trend in Hotai Insurance’s operating performance, says AM Best.
Balance sheet strength
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, despite 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 fundamentals will remain stable and its support to Hotai Insurance will maintain strong.