AM Best Affirms Credit Ratings of Hotai Insurance Co., Ltd.

AM Best has 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 outlook of these Credit Ratings (ratings) is stable.

The Credit Ratings (ratings) reflect Hotai Insurances balance sheet strength, which AM Best categorizes 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).

Hotai Insurances balance sheet strength is supported by its risk-adjusted capitalization at the strongest level, as measured by Bests Capital Adequacy Ratio (BCAR). This reflects that the companys risk-adjusted capitalization remains supportive of its risk profile despite significant growth in underwriting leverage and increased asset risk. Hotai Insurance has not paid dividends since its change in ownership (2017) and plans to fully retain profits to support its long-term sustainable growth. In addition, the company closely monitors its business execution activities, as well as other key risks to mitigate volatility in its capital and surplus.

The companys operating performance was assessed at the marginal level due to its higher-than-average expense ratio resulting in an overall negative underwriting performance over the past five years. However, since 2018, Hotai Insurance has shown an improving track record in terms of robust growth in gross premium written and underwriting profitability. Its net expense ratio has improved as a result of efforts in expense control and economies of scale. Nonetheless, upward pressure on its loss ratio, due to an increasing undertaking of the motor business, adds an element of uncertainty in executing the companys business plan.

Hotai Insurance continues to leverage its parent groups competitive strength as the largest auto distributor in Taiwan and its extensive distribution network. Its market share has increased gradually under the new ownership.

Positive rating actions could occur if Hotai Insurance continues demonstrating positive operating performance in line with its business plan while maintaining a supportive level of risk-adjusted capitalization. Negative rating actions could occur if a higher-than-expected risk profile leads to a sharp decline in the companys risk-adjusted capitalization. Negative rating actions also could occur if the level of business commitment from the affiliated distribution channel decreases significantly, or if there is a material deterioration in Ho Tai Motors credit profile.

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 Bests 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 Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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June Wang

Associate Financial Analyst

+852 2827 3416

[email protected]

Christie Lee

Senior Director

+852 2827 3413

[email protected]

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

Jim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644

[email protected]