Standard & Poor’s Insurance Ratings Natalie Wells Director Financial Services Ratings Taipei 27 October 2000
Who is Standard & Poor’s? Insurance Managed Funds Financial Institutions Corporates Sovereigns Infrastructure Structured Finance Public Finance
Standard & Poor’s Insurance Ratings We Currently Rate Approximately 4,000 Insurance Companies In Over 70 Countries Across All Sectors Of The Market
Largest Financial Services Team in Asia 29 financial services analysts 12 specialist insurance analysts Located in Japan, Hong Kong, Taipei, Singpore, Melbourne, Sydney
Strongest Insurance Ratings Coverage in Asia Japan - 98% Hong Kong - 50% Taiwan - 90% Singapore - 70% Australia - 90% New Zealand - 90% please make this a bar chart
Types of Ratings Interactive Public Information Forward-looking Qualitative and quantitative Management interaction Public and confidential information Ongoing surveillance Public Information ‘pi’ Model-driven Publically available information Point-in-time
Insurer Financial Strength Rating Scale Secure Range ‘AAA’ to ‘BBB’ AAA = Extremely Strong AA = Very Strong A = Strong BBB = Good Vulnerable Range ‘BB’ to ‘CC’ BB = Marginal B = Weak CCC = Very Weak CC = Extremely Weak R = Regulatory Action
Global Insurance Ratings Distribution
Asian Insurance Ratings Distribution
www.standardandpoors.com/ratings All Ratings Global Coverage
Standard & Poor’s Taiwan Ratings Corporation Rating Methodology Insurance Companies
Standard & Poor’s Ratings Process Preparation Issuer Meeting Surveillance Rating Committee Dissemination or Appeal Process Communication to Company
Standard & Poor’s Approach Major Analytical Categories Industry Analysis Management and Corporate Strategy Business Review Operating Performance Investments Capitalisation Asset-Liability Management and Liquidity Financial Flexibility and Reinsurance
Business Review Ownership Organisational structure/non- insurance activities Geographic dispersion Product mix Distribution channel Market share Competitive advantages
Management and Corporate Strategy Strategic goals Operational skills, planning, controls Financial controls, risk tolerance Background of senior officers
Operational Performance Sources, stability and quality of earnings Focus on return on assets and return on revenue Review other measures of profitability Review tax position Underwriting performance for general insurers
Investments Asset allocation strategy Credit quality of portfolio Asset concentration or diversification Return on investment (current yield and total yield) Asset-liability management (ALM)
Capitalisation Analysis Leverage - Operating - Loss reserve - Investment - Financial leverage Other threats to capital Quality of capital
Reinsurance Usage of reinsurance Retentions and aggregate limits Quality of reinsurance
Liquidity Underwriting/operating cash flow Total cash flow Liquidity of investment portfolio Other sources of liquidity
Financial Flexibility Available sources of new capital Anticipated cash requirements Shareholder dividend policy Access to reinsurance markets Impact of non-insurance activities
Study: Insurance company failure Chiyoda Life (千代田壽險) When we visit new or less developed ratings markets, a common question which we are asked by insurance companies is “why do we need your ratings, S&P? we are big, we are strong, we’ve been around for 30 years or 100 years, everyone trusts us..’ Our experience around the world over many years, has told us that insurance companies can fail and do fail. In markets like the United States insurance companies fail all the time, leaving their policyholders exposed and out of pocket Closer to home, you will no doubt be aware of the failures which have occurred in the Japanese life market. We thought it might beinteresting today to have a look at the Japanese market, and Chiyoda Life in particular. We picked Chiyoda becauseit was a very substantial company: at its peak in 1995, Chiyoda had assets of nearly 7 trillion yen, and it was the 8th largest life insurer in Japan for many years.
產業狀況 強弱公司間的差距日益擴大 日本經濟衰弱 投資環境艱困 競爭升高 法規管制解除 外商保險公司增加 For background I shall start with an overview of industry conditions. The performance of the Japanese life industry has been very weak for some time in line with the economy, as indicated by steady declines in premium and investment income in the last five years. In fiscal 1999, total industry assets declined for the first time since world war two. Surrenders and lapses, which sharply increased after the first collapse of a Japanese life insurer in 1997, remain high. In addition to the contrained earnings from the core business, the investment environment remains challenging. Most of the stronger companies in Japan have been addressing the asset quality issues proactively by reducing risk assets, shifting into fixed income investments, and writing off problem loans. However. The Nikkei, which reached over 20,000 at the enf of March this year is now around 16,000 and significantly hurting som eof the weaker companies in the market. In the past 12 months we have seen many of the smallerand weaker domestic insurers being acquired by strong foreigners: Toho and GE, Heiwa by Aetna, Nippon Dantai by AXA and Orico by Winterthur. Most of the acquired companies were unlisted stock companies which made them easier takeover targets compared with the mutuals. In addition to takeovers, alliances between Japanese life insurers and other financial institutions also is increasing in various forms.
保險業展望 持續的激烈競爭 由於積極推出新產品，保費可能些微成長 較小/較弱公司退出市場 相互保險公司改為股票發行公司，可增進公司之財務 彈性
日本倒閉保險業者之共同特色 財務彈性有限，尤其是相互保險公司 對股市投資過高 不良放款過高 高退保率/資金流失 無法爭取新業務及資金
千代田壽險公司背景 極具規模的大型相互保險公司 市場排名曾高居第八 1997年以來第五家倒閉之壽險公司 10月9日申請法院破產保護
千代田壽險公司背景 標準普爾公司授予Bpi公開資訊評等 “…反映該公司脆弱的財務結構及惡化的業務地位…不良的營運績效、資產 損失、高退保率以及新業務的衰退已對其資本造成侵蝕，且對其資產負 債結構形成相當大的壓力。千代田壽險必須挹注龐大資金，以確保能繼 續營運。”
千代田壽險公司--倒閉原因 泡沫經濟期間積極追求成長 過度倚賴保證利息高之產品 資產負債管理不良 風險性資產過多 前財務支持者於該公司營運惡化時抽身
自由化及資本結構 台灣保險業面臨之問題 Terry Chan 標準普爾公司大中華地區金融機構評等負責人 Taipei, Oct
自由化及資本結構 台灣保險市場現況 經濟現況優於其他國家，但是: 保費成長率不算高 主要險種保費及佣金費用競爭激烈 承保利潤面臨壓力,日益仰賴投資獲利 主管機關提高資本之最低門檻 上述幾點顯示保險業須進行整合
自由化及資本結構 自由化的過程 解除管制時保險業通常會歷經以下階段: 第一階段 由於新業者投入,市場規模擴增，導致利潤面臨壓力； 承保範圍及營業據點增加 第二階段 業者退出市場或進行合併,市場規模萎縮. 第三階段 趨於平衡,但獲利水準較先前為低
法規及資本結構 自由化可能引發業界之購併 因應競爭及面臨對資本的需求可能引發購併： 法規及資本結構 自由化可能引發業界之購併 因應競爭及面臨對資本的需求可能引發購併： 本土業者 因無法達到法定資本要求而被迫合併 較長期而言, 績效較差之業者亦可能為被購併之對象,實 力較強之業者可能尋求策略聯盟 外商 因看好成長前景（市場尚未成熟,仍在發展中）及其專 業能力之發揮空間而前來
自由化及資本結構 追求效率 由於普及率較低的保險市場可能成長緩慢： 商品化 產品及服務日益商品化,導致利潤面臨壓力 商品化 產品及服務日益商品化,導致利潤面臨壓力 追求效能 因此,為追求股東權益報酬率之目標,保險業者於是致力 追求產品,銷售,人力資源,費用及資本等方面效率之提 升
自由化及資本結構 其他型式之資本 其他型式之資本多具以下特色（依主管機關或一般業界之 定義） 次順位債券 求償順位較低之債券 次順位債券 求償順位較低之債券 到期日長 到期日不一 – 部份長至10年 得延後償還利息/本金之條款 若未能達到某些標準 (例如,主管機關對資本的規定,淨 質為正數),則延後支付利息或償還本金
自由化及資本結構 資本效率對評等的影響 對資本運用效率重視, 使資本評估之不確定性提高： 資本水準相對於承擔之風險 對資本比率之分析已有別於以往 評等壓力主要來源 資本比率降低構成對保險業者的降等壓力
信用評等之使用 The Value of Ratings 郭書岑 中華信用評等公司 協理 Christine Kuo Associate Director, Taiwan Ratings
什麼是信用評等? What is a Credit Rating? 信用評等是由獨立第三者對企業履行其財務承諾能力 之評估 A credit rating is an unbiased, independent opinion as to a company’s capacity to meet its financial obligations.
什麼是保險人財務實力評等? What is an Insurer Financial Strength Rating? 保險人財務實力評等乃評估保險公司依保單契約條款 履行保單義務之財務能力 FSR is an opinion of any insurer’s financial capacity to meet its policy obligations in accordance with policy terms. Secure Range AAA 極強 AA 非常強 A 強 BBB 佳 Vulnerable Range BB 稍弱 B 薄弱 CCC 非常薄弱 CC 極度薄弱 R 主管機關管理中
本國信用評等等級 Local-Scale Ratings 與國內保險及非保險業者做比較 Compared against local insurers/issuers. 相同之評等方法 Same rating methodology 評等等級前加註 tw 符號以示區分 Differentiate with global-scale by “tw” script
如何使用信用評等 Where ratings can be used? 保險公司 for insurance companies 保險經紀人 / 代理人 for insurance brokers/agents
正確使用信用評等? Correct use of Credit Ratings? 信用評等必須持續追縱 constant monitoring 信用評等 投資建議 not an investment recommendation 互動式信用評等 公開資訊評等 interactive ratings pi ratings
信用評等之過程 Credit Rating Process 簽約 sign rating contract 準備資料 pre-meeting information 管理階層會議 management meeting 主辦分析師準備資料 post-meeting analysis 評等委員會決定最後評等 rating committee
機密性資料 Confidentiality 機密性資料之使用 Use of confidential information 信用評等須遵守保密協定 Confidentiality agreement (even to regulators!) 評等結果之公開 Release of ratings/reports