Fitch Ratings has affirmed Fubon Life Insurance’s stable outlook, citing improved capital adequacy following the issuance of TW$25 billion ($775 million) in subordinated securities. This move has bolstered the insurer’s capital base, shielding it from fluctuations in investment assets.
According to Fitch Ratings, the financial leverage ratio remains robust despite the new debt issuance. The rating agency’s assessment highlights Fubon Life’s enhanced company profile, stable financial performance, and managed investment risk.
The issuance of TW$25 billion in subordinated securities during the second half of 2023 has significantly strengthened Fubon Life’s capital position. These securities are recognized as available capital under Taiwan’s risk-based capital (RBC) regime and Fitch’s Prism Model.
By the end of 2023, Fubon Life’s RBC ratio had increased to 336% from 315% the previous year, while the net worth ratio improved to 9.8% from 5.67% over the same period. Fitch Ratings maintained its ‘Strong’ Prism score for the insurer.
Total capital, including a portion of reserves, grew to TW$506 billion by the end of 2023 from TW$305 billion a year earlier. This increase was partly attributed to reclassifying some assets from fair value to amortized cost, thereby reducing the impact of unrealized losses and making Fubon Life’s capital less sensitive to market volatility.
Fubon Life’s financial leverage ratio held steady at 13% in 2023, down slightly from 14% in 2022.
The insurer’s strengthened profile is underpinned by its substantial market share (15% by premium income in 2023), leading franchise, diversified distribution channels, and geographic footprint with subsidiaries in South Korea, Hong Kong, and Vietnam. Additionally, a reduced appetite for business risk, particularly in legacy portfolios with high guaranteed rates, has contributed to its improved standing.
Fubon Life’s return on equity averaged 14% from 2021 to 2023, supported by stable gains in mortality and morbidity.
Despite reducing its exposure to risky assets, which now constitute 168% of total capital compared to 236% a year earlier, Fubon Life’s risky-assets ratio remains above the guideline range for its IFS rating. The insurer’s significant holdings in stocks and overseas investments expose it to foreign-currency risk, given some investments are not fully backed by foreign-currency policies and are partially unhedged.
Looking ahead, Fubon Life intends to maintain a significant proportion of overseas investments to achieve higher returns, while employing dynamic hedging strategies to manage currency mismatch risks.
(1 USD = 32.39 TWD)
