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).
The company’s balance sheet strength assessment is underpinned by its risk-adjusted capitalization, which is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). Other favorable balance sheet strength considerations include a low net underwriting leverage ratio and conservative investment portfolio consisting of cash and term deposits, indicating a strong liquidity position. In addition, AM Best views Fubon Vietnam as having good financial flexibility, supported by its immediate parent, Fubon Insurance. AM Best considers the company’s high third-party reinsurance usage and dependence as an off-setting balance sheet strength 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 5.8% (2017-2021). Fubon Vietnam’s underwriting performance benefitted from an improved expense ratio in 2021, supported by increasing business scale and favorable reinsurance commissions; however, performance was negatively impacted by catastrophe losses from its foreign inward business. Subsequently, the company has benefited from favorable reserve movement over the first nine months of 2022. Prospective performance is expected to remain at the adequate level although planned infrastructure investments may lead to an uptick in operating expenses over the near to medium term. Fubon Vietnam’s investment yield has declined in recent periods but its interest income remains an important component of overall earnings.
AM Best assesses Fubon Vietnam’s business profile as limited. Fubon Vietnam is a small-size, non-life insurer in Vietnam, with a market share of approximately 1%, as measured by 2021 gross written premium (GWP). Although Fubon Vietnam is considered a small size company 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 Taiwan corporations within its domestic market, with its business profile benefiting from the brand recognition of its parent, Fubon Insurance, a market leading non-life insurer incorporated in Taiwan. The company’s underwriting portfolio has a high concentration in property insurance, which accounted for over 75% of 2021 GWP.
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 the Fubon group and receives implicit and explicit support, including areas of new product development, pricing and reserving, as well as management oversight. 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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