AM Best Confirms Fubon Insurance Co., Ltd Credit Ratings

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AM Best affirmed the financial strength rating of A (Excellent) and the issuer’s long-term credit rating of “a+” (Excellent) of Fubon Insurance Co., Ltd. (Fubon Insurance) (Taiwan).

The outlook for these Credit Ratings (ratings) is stable.

The ratings reflect Fubon Insurance the strength of its balance sheet, which AM Best assesses as very strong, as well as its adequate operating performance, favorable business profile and appropriate management of business risks.

Fubon Insurance risk-adjusted capitalization remained at the highest level at the end of 2021, as measured by Best’s capital adequacy ratio (BCAR). The company’s adjusted capitalization, including special reserves provisioned for the non-mandatory motor third party liability business, continued to grow organically in 2021, driven by partial earnings retention and capital gains ​favorable. The company continued to adopt a cautious investment strategy in 2021, with a majority of assets invested in cash and cash equivalents, bonds, as well as moderate exposure to domestic equities. The Company’s overseas investments consist primarily of high quality bonds.

Due to the degraded situation of COVID-19 in Taiwan since April 2022, Fubon Insurance was negatively impacted by significant claims related to pandemic insurance policies. The company’s ultimate parent company, Fubon Financial Holding Co.,Ltd. (Fubon Financial Holding), made a capital injection of 15 billion TWD in August 2022. AM Best sees the recent capital injection as sufficient to absorb the potential shift in pandemic insurance claims and support the very strong balance sheet strength assessment.

Fubon Insurance continued to generate profits in 2021, supported by positive underwriting and investment results. The company’s business continued to expand in 2021 with gross premiums written (GPW) growth of 10.9%, while its underwriting experience across the underwriting portfolio remained stable and profitable until in 2021. However, due to increased pandemic-related claims in 2022, the company reported a net loss of TWD 3.3 billion for the first half of 2022, approximately half of the 2021 net profit. Although the ultimate loss for 2022 and 2023 remains uncertain at this stage, AM Best views the negative impact on the company’s profit and loss as a one-time event , as pandemic-related proceeds will be completely exhausted in the first half of 2023. Given its track record of favorable operating results in traditional lines, the business should be able to recover its losses in the short to medium term. .

The company’s investment results remained supportive of its overall operating results thanks to stable streams of interest and dividend income. Capital gains through other comprehensive income partially supported organic capital growth. Fubon Insurance foreign branch in China managed to turn a profit in 2021, mainly thanks to a capital gain realized on its long-term equity investments. Nevertheless, the size of the Chinese subsidiary’s activity remains small compared to Fubon Insurance Company.

Fubon Insurance maintained its leading position in the market Taiwan non-life market and continued to strengthen its market presence in 2021, accounting for around a quarter of the non-life market in terms of GPW. The company continues to leverage its parent group’s sales network in supply activities, while maintaining a moderately diversified underwriting portfolio in terms of products.

Negative rating actions could occur if there is a substantial decline in Fubon Insurance risk-adjusted capitalization, for example, due to adverse development and a much higher than expected ultimate loss from pandemic insurance, and without timely additional capital support from its ultimate parent company, Fubon Financial Holding. Negative rating actions could also occur if Fubon Insurance shows a significant and sustained deterioration in its operating performance, particularly in terms of the non-pandemic traditional underwriting portfolio and investment results. A significant deterioration in the parent company’s credit profile, Fubon Financial Holdingcan also have a negative impact on Fubon Insurance odds.

Ratings are communicated to rated entities before publication. Unless otherwise indicated, the ratings have not been changed as a result of this 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 relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit AM Best’s Recent Rating Activity webpage. For more information on the use and limitations of credit rating opinions, please see Best’s Guide to Credit Ratings. For more information on the proper use of Best’s Credit Scores, Best’s Performance Ratings, Best’s Preliminary Credit Ratings, and AM Best’s press releases, please see the Guide to Proper Use of Best’s Best ratings and reviews.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Based at United Statesthe company does business in more than 100 countries with regional offices in London, amsterdam, dubai, hong kong, Singapore and Mexico City.


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