A.M. 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 Insurances balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.
Fubon Insurance continues to maintain a robust risk-adjusted capitalization, supported by prudent reserving practices, a comprehensive reinsurance program and gradual organic growth in retained earnings, despite high dividend payout ratios.
The company has delivered a track record of stable operating profitability, mainly underpinned by favorable investment earnings and profitable results from its domestic underwriting portfolio, although partially offset by operating losses from its China operations. Moreover, a weakened Taiwan dollar in 2017 negatively impacted the companys sizable overseas investment portfolio, leading to a significant foreign exchange loss during the year, despite having been partially hedged by the use of derivatives.
Fubon Insurance’s favorable business profile is underpinned by its market-leading position and solid brand recognition in Taiwans non-life insurance market over the past three decades. As a wholly owned subsidiary of Fubon Financial Holding Co., Ltd., Fubon Insurance benefits from cross-selling synergies with affiliated companies while forming a strategic part of the financial product suite.
Offsetting rating factors include higher volatility in domestic and overseas investment markets, the companys exposure to unhedged foreign currency risk, as well as execution risk in improving the operating profitability of its overseas operations. Moreover, the companys underwriting portfolio is concentrated in catastrophe-prone geographies.
Positive rating actions could occur if the company demonstrates a sustainable improvement in its operating performance while maintaining a robust risk-adjusted capitalization. Negative rating actions could occur if there are material capital or dividend payouts that lead to a substantial decline in its risk-adjusted capitalization.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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