KUALA LUMPUR, Feb 7 (Bernama) -- AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” (Excellent) from “a+” (Excellent) and affirmed the Financial Strength Rating of A (Excellent) of Fubon Insurance Co Ltd. (Fubon Insurance) (Taiwan), concurrently, placing these Credit Ratings (ratings) under review with negative implications.
The ratings reflect Fubon Insurance’s balance sheet strength, which AM Best assessed 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).
The Long-Term ICR downgrade reflects the material deterioration in Fubon Insurance’s risk-adjusted capitalisation to the very weak level as of year-end 2022 from the strongest level in 2021, as measured by Best’s Capital Adequacy Ratio. The risk-adjusted capitalisation is expected to improve over the short term, as per the company’s capital plan.
The company’s investment portfolio shrank as it sold some investments to pay out the sizeable insurance claims.
According to a statement, global credit rating agency AM Best noted that the company is equipped with adequate liquidity to fulfil any short-term surge in claims. The company has arranged short-term collateralised financing with financial institutions.
Going forward, AM Best expects Fubon Insurance’s capital and surplus to resume growth through the retention of net profits derived from non-pandemic insurance underwriting and investment results, although it is unlikely to recover to its pre-COVID-19 level over the short to intermediate term.
Notwithstanding, United States-headquartered AM Best considered the pandemic insurance loss as a one-off event, and that the company should be able to return to profitability going forward via the traditionally profitable non-pandemic insurance underwriting and investment results, given its historical track record of adequate operating performance.
Fubon Financial Holding is the second-largest listed financial holding company in Taiwan in terms of total assets, playing 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.
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