S&P Affirms Fubon Insurance 'AA-' Rtg; Outlook Stable.Business Editors HONG KONG--(BUSINESS WIRE)--Standard & Poor's Jan. 24, 2002--Standard & Poor's today affirmed its double-'A'-minus insurer financial strength and counterparty Counterparty The other participant, including intermediaries, in a swap or contract. credit ratings on Fubon Insurance Co. Ltd. (Fubon Insurance). The outlook on the counterparty credit rating is stable. The ratings on Fubon Insurance reflect the company's leading position in the Taiwan nonlife insurance market, its strong capitalization, and its consistently good operating performance. These factors are moderated by the competition faced by Fubon Insurance and changes in the company's reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. arrangements. Fubon Insurance has been a subsidiary of the newly formed Fubon Financial Holding Co. Ltd. (FFHC FFHC Freedom from Hunger Campaign ) since December 2001. The other subsidiaries of FFHC are Fubon Commercial Bank Co. Ltd., Fubon Securities Co., Ltd. and Fubon Life Assurance Co. Ltd. Fubon Insurance is the market leader in Taiwan's general insurance industry, with a market share of around 20% in terms of premiums written, or nearly twice the share of its nearest competitor. As with most other Taiwan general insurers, the company is primarily a short-tail underwriter. The motor insurance business accounted for 52% of its direct premiums written as at the third quarter of 2001. Fubon Insurance is the market leader in most of the classes of insurance that it writes. The company has a strong distribution network and a reputable brand name, and its franchise remains robust. With a sound and experienced management team as well as a prudent risk management approach, the company is one of the more sophisticated general insurance operations in Taiwan. The overall operating performance of the company has been good and stable in the past. Its return on revenue for the past three years (1999-2001) has been good at about 30%. Moreover, the company's combined ratio is low; it stood at 94% in 2000 and 87% for the first three quarters of 2001. The company, however, is affected to a certain extent by industry deregulation Deregulation The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Notes: Traditional areas that have been deregulated are the telephone and airline industries. . New levels of pricing and distribution competition, and a growing focus on more volatile and longer liability classes of insurance, will gradually erode Erode (ĕrōd`), city (1991 urban agglomeration pop. 361,755), Tamil Nadu state, S India, on the Kaveri River. The city is located in a cotton-growing region, and its industries include cotton ginning and the manufacture of transport equipment. the profitability of Taiwan's general insurers. On the other hand, the tightened global reinsurance market has placed the company in a more active underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. position due to a lower level of reinsurance protection. In a financial holding group structure, fungibility Fungibility The interchangeability of listed options, futures contracts, and other instruments dependent upon identical terms. Notes: Fungibility allows buyers and sellers to close out a position through a closing transaction in an identical contract. of resources among group members is generally enhanced. However, the common holding of the Tsai family, the largest holder of shares in Fubon group companies prior to the formation of FFHC, already implied a degree of fungibility, albeit constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by a requirement for regulatory permission. Following the restructuring of the group, Fubon Insurance's capitalization remains at a strong level. Its ratio of adjusted shareholders' funds to net premium income was still above 350% as at the end of 2001. OUTLOOK: STABLE The stable outlook incorporates expectations that Fubon Insurance will remain the market leader in the island's general insurance sector and continue to produce a stable operating performance. The company's capitalization is expected to moderate over the next few years as the company continues to grow. Its capitalization, however, is likely to remain at a level commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. with its ratings. The company's risk retention is expected to increase in 2002 due to a change in its reinsurance arrangements, which may affect its underwriting performance in the year ahead. However, the impact is expected to be moderate due to the company's experience and its sophisticated underwriting skills. The company is expected to remain a major contributor of earnings for the Fubon group. Copyright 2002, Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion