SINGAPORE--(BUSINESS WIRE)--AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb+” to Fubon Insurance Vietnam Co., Ltd. (Fubon Vietnam) (Vietnam). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Fubon Vietnam’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. In addition, Fubon Vietnam benefits from rating enhancement from its parent company, Fubon Insurance Co., Ltd. (Fubon Insurance) (Taiwan).
Fubon Vietnam’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation that is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). Favorable balance sheet considerations include the company’s low net underwriting leverage, full profit retention to support its business growth over recent years and a conservative investment portfolio, comprised solely of cash and term deposits. Nonetheless, AM Best considers high third-party reinsurance usage and dependence to support the underwriting of large property and engineering risks as an offsetting balance sheet factor, although reinsurance assets are typically of good credit quality.
AM Best views the company’s operating performance as adequate, as demonstrated by a five-year average return-on-equity ratio of 5.2% (2015-2019). Underwriting performance improved to a level of modest profitability in 2019, supported by portfolio remediation measures and an increasing business scale, which has helped lower the company’s expense ratio. The company’s underwriting results are supported by its commercial insurance portfolio, more notably property insurance, while being offset by poorer performing lines including motor, health and personal accident insurance. Investment income has been the key contributor to overall operating earnings over the past five years, with investment returns expected to be subject to some near term pressures given domestic interest rate declines.
Fubon Vietnam’s business profile is assessed as limited. The company is a non-life insurer in Vietnam, established in 2008 as a wholly owned subsidiary of Fubon Insurance. Although the company is considered a small size player within Vietnam, it has a good market position in its core business segment of property insurance. The company generates a significant portion of its business from Taiwanese corporations within the Vietnam market, benefitting from the brand recognition of its parent, a market leading non-life insurer in Taiwan. However, its underwriting portfolio is concentrated by line of business and geography given that all business originated from its domestic market and property risks accounted for over 70% of gross premiums written in 2019.
The company receives rating enhancement from its ownership and integration with Fubon Insurance, as well as implicit and explicit support from its parent. Fubon Vietnam benefits from its common branding and affiliation with Fubon Insurance and receives support in the areas of new product development, pricing and reserving, as well as the management oversight in respect of investment and risk management. Furthermore, despite only accounting for a small proportion of the parent’s consolidated earnings, the company is considered important in providing insurance for Taiwanese corporations in Vietnam and for regional business growth across Southeast Asia over the medium to long term.
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