Central Re’s finances bolstered by prudent investments and retrocession

AM Best sees Central Re to continue focusing on low-risk, fixed-income investments.

Central Reinsurance Corporation (Central Re) (Taiwan) is anticipated to keep its “prudent” underwriting strategy whilst keeping a sustainable profitability. Additionally, the reinsurer will benefit from the enhanced diversification in both its geography and clientele in the medium-term, AM Best said.

Central Re’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level at the end of 2023. 

The company's adjusted capital and surplus increased by 10% to $650m (TW$21b), supported by organic profit accumulation. 

Key factors contributing to its balance sheet strength include a prudent investment strategy, comprehensive retrocession arrangements, and high financial flexibility. 

The investment portfolio is diversified and liquid, primarily in cash and investment-grade bonds, and AM Best expects Central Re to continue focusing on low-risk, fixed-income investments.

In 2023, Central Re reported a net profit of $5m (TW$2.1b), with a five-year return on equity of 7.0%. 

The company's domestic non-life business showed recovery-driven growth after pandemic-related losses, whilst its domestic life business continued to perform well. 

The overseas business saw modest profits, with some impact from catastrophe losses. Investment results were stable, benefiting from fixed-income assets and dividend income, although currency fluctuations added volatility.

Central Re, Taiwan’s sole domestic reinsurer, maintains strong relationships with local cedants, though its domestic market share has declined slightly due to a shift from personal to commercial lines. 

The company has expanded its overseas business, now contributing about 20% of its underwriting portfolio. 

($1.00 = TW$32.4)