Best’s News & Research Service - August 04, 2023 09:39 AM (EDT)
AM Best Maintains Under Review With Negative Implications Status for Credit Ratings of Fubon Insurance Co., Ltd.
- August 04, 2023 09:39 AM (EDT)
Hong Kong //BestWire// - AM Best has maintained the under review with negative implications status for the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Fubon Insurance Co., Ltd. (Fubon Insurance) (Taiwan).
The Credit Ratings (ratings) reflect Fubon Insurance’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management. The ratings also reflect the support that the company receives from its ultimate parent, Fubon Financial Holding Co., Ltd. (Fubon Financial Holding).
Fubon Insurance’s ratings were placed under review with negative implications on 3 February 2023, reflecting the uncertainty in the company’s capital position, which depended on its pandemic insurance loss development and the amount of further capital support from Fubon Financial Holding at that time. As of year-end 2022, the company’s reported capital and surplus (C&S) was TWD 5.2 billion. With pandemic insurance policies reaching maturity in the first half of 2023 and the completion of the second round of capital injection of TWD 16 billion in May 2023, the company’s reported C&S, based on unaudited financial statements, recovered to TWD 18.5 billion at the end of June 2023. Moreover, the company has turned around with positive operating results since April 2023. Notwithstanding, Fubon Insurance’s ratings remain under review with negative implications, mainly driven by the continued uncertainty from reinsurer credit risk due to Fubon Insurance’s sizeable reinsurance recoverable. While the exposure has declined slightly over the past few months, it remains as a significant proportion of the company’s capital position. Fubon Insurance maintains ongoing discussions with reinsurer counterparties; however, in case of the event of potential major disputes in reinsurance contracts without timely parental financial support, the company’s risk-adjusted capital position and liquidity may be subject to exacerbated pressure.
Fubon Financial Holding is the second-largest listed financial holding company in Taiwan in terms of total assets. Fubon Insurance plays a strategic role in the parent group’s financial platform and receives long-term operating and capital commitments provided by Fubon Financial Holding, as evidenced by the aforementioned capital injection. The lift assessment reflects AM Best’s expectation that the parent will remain committed in providing additional financial support to Fubon Insurance in a timely manner to bolster the company’s balance sheet strength if needed.
AM Best will continue to hold discussions with Fubon Insurance’s management team on the status of reinsurance collectibles to assess the impact to the company’s 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 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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.