Best’s News & Research Service - November 06, 2020 11:31 AM (EST)
AM Best Affirms Credit Ratings of Fubon Insurance Co., Ltd.
- November 06, 2020 11:31 AM (EST)
Hong Kong //BestWire// - AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” of Fubon Insurance Co., Ltd. (Fubon Insurance) (Taiwan). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Fubon Insurance’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.
Fubon Insurance’s risk-adjusted capitalisation remained at the strongest level at year-end 2019, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s adjusted capital and surplus grew by 17.5% in 2019 to TWD 42.7 billion (USD 1.4 billion) as of year-end 2019, supported by a moderate level of profit retention, and favourable unrealized capital gains during the year. Invested assets are diversified, with a majority of the portfolio invested in liquid assets including overseas and domestic investment-grade fixed income investments.
Fubon Insurance’s operating performance continues to be supported by positive underwriting and investment results in 2019, with a five-year average return on equity of 8.5%. The company’s domestic underwriting book of business (excluding compulsory auto liability insurance) remains stably profitable in 2019, with a net combined ratio of 91%, partially contributed by favourable claims experience in personal-line products including voluntary motor, accident and health and personal fire insurance, as well as the commercial property business, due to the relatively benign catastrophe environment over recent years. The company’s investment performance continues to support the overall operating results through stable streams of interest and dividend income, with an investment yield, included investment and exchange gain/loss, ranging to 4.5% from 4% in the past five years. An offsetting factor is the continued negative operating results at Fubon Insurance’s subsidiary in China, driven by intense market competition, despite the business scale remaining small compared with the domestic business in Taiwan.
Fubon Insurance continues to be the market leader in the Taiwan non-life market, with a market share of 23.8% in 2019, in terms of gross premium written. Leveraging its extensive distribution network and strong brand recognition, the company is able to maintain a diversified and consistently profitable domestic underwriting portfolio.
While Fubon Insurance is well-positioned at its current rating levels, negative rating actions could occur if there is a substantial decline in the company’s risk-adjusted capitalisation. A material deterioration in the credit profile of the parent company, Fubon Financial Holding Co., Ltd., may also impose a negative impact on the ratings of Fubon Insurance Co., Ltd.
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 Best’s 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 Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising 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.