Moody's upgraded its outlook on topositive from stable amid the insurer's improving profitability.
At the same time, the rating agency affirmed the company's insurancefinancial strength rating at A3.
Moody's said Cathay Century Insurance's return on capitalhas improved to 6.7% in 2015 from 3% in 2013. Underwriting profits from thecompany's major product lines have gradually improved and would likely continueto do so.
Meanwhile, the insurer's level of adverse loss developmenthas declined in the past few years. Moody's expects the company's lossdevelopment trend to stabilize on the back of its increasing focus on personallines, which have short-tail risk profiles.
A ratings upgrade is possible if the company is able tosignificantly improve its profitability or if it reports a more stable lossreserve development trend. A ratings upgrade is also possible if the insurermaintains its gross underwriting leverage at around the current level.
On the other hand, Moody's could downgrade the outlook ifthe company's capitalization weakens or if its profitability deteriorates. Itcould also lower the outlook if there is a significant adverse loss reservedevelopment on the company or if the ratings of the other subsidiaries are downgraded.