SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of Fubon Insurance Vietnam Co., Ltd. (Fubon Vietnam) (Vietnam). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Fubon Vietnam’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also factor in rating enhancement from its parent company, Fubon Insurance Co., Ltd. (Fubon Insurance) (Taiwan).
Fubon Vietnam’s balance sheet strength assessment is underpinned by its 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, a conservative investment portfolio consisting solely of cash, and term deposits. In addition, the company is viewed to have good financial flexibility supported by its parent, Fubon Insurance. AM Best considers the company’s high third-party reinsurance usage and dependence as an offsetting balance sheet factor, albeit that reinsurance counterparty risks are mitigated by reinsurance assets of typically good credit quality.
AM Best views the company’s operating performance as adequate, as evidenced by a five-year average return-on-equity ratio of 6.3% (2016-2020). The company’s underwriting performance continues to be supported by its commercial insurance portfolio, more notably property insurance, while being offset by poorer performing lines including personal accident and health insurance. The expense ratio has reduced in 2020 driven by an increasing business scale and higher premium retention. In addition, reinsurance commissions remained a good contribution to overall earnings. Investment income is a key contributor to overall earnings, although it is expected to be constrained given low domestic interest rates over the near term.
AM Best assesses Fubon Vietnam’s business profile as limited. Fubon Vietnam is a small-sized non-life insurer in Vietnam, with a market share of less than 1%, as measured by 2020 gross premium written (GPW). 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 derives a significant proportion of business from Taiwanese corporations within its domestic market, whereby its business profile benefits from the brand recognition of its parent, Fubon Insurance, a market leading non-life insurer incorporated in Taiwan. The company’s underwriting portfolio exhibits a high concentration to property insurance, which accounted for over 70% of 2020 GPW, as well as a concentration to the domestic non-life market.
The company’s ratings incorporate rating enhancement from its ownership and integration with Fubon Insurance. Fubon Vietnam benefits from its common branding and affiliation with Fubon Insurance, and receives implicit and explicit support from its parent. The company is considered important in supporting the group’s regional business growth across Southeast Asia over the medium to long term.
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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