Investing.com -- On March 21, 2025, Moody’s Ratings affirmed Fubon Insurance Co., Ltd.’s A2 insurance financial strength rating (IFSR) and adjusted the outlook from negative to stable. This confirmation is based on Fubon Insurance’s leading position as the largest non-life insurer in the domestic market and its strong financial flexibility, being a part of Fubon Financial Holding Co., Ltd. However, these strengths are counterbalanced by the insurer’s considerable gross catastrophe exposure due to its geographic concentration and a higher asset risk exposure than its global peers due to its substantial equity and real estate investments.

The change in outlook to stable from negative is a result of a significant reduction in potential strains on Fubon Insurance’s capitalization and profitability due to challenges in collecting its reinsurance recoverables associated with Covid-related policies. The insurer made substantial progress in collecting these recoverables from reinsurers in the fourth quarter of 2024, resulting in a decrease of about 57% in the gross recoverable balance to TWD6.4 billion by the end of 2024.

The rating action also takes into account the significant improvement in Fubon Insurance’s profitability and capitalization over the past 12 months. The insurer reported a profit of TWD3 billion in 2024, a turnaround from a net loss in 2023, primarily due to a decrease in claims on Covid-related policies. Its combined ratio was 87% in 2024, a good level compared to its global peers. The insurer’s profitability is expected to recover gradually to historically strong levels in the next 12-18 months, supported by strong underwriting profitability and good investment income. As a result of improving earnings, the insurer’s local risk-based capital (RBC) ratio increased to around 335% at the end of 2024 from 278% a year ago. The RBC ratio is forecasted to remain well above the regulatory minimum of 200% in the next 12-18 months.

The insurer’s reduced governance risks have also been taken into account. It has returned to a relatively prudent financial and capital management policy. Its capitalization has gradually recovered to a solid level, sufficient to support its underwriting and investment activities over the next few years, thanks to capital injections from Fubon Financial and the recovery of retained earnings generation. The insurer has no outstanding debts after fully repaying its short-term borrowings, which has significantly reduced its financial leverage. The insurer is not expected to raise any debt financing in the next 12-18 months, given its solid capitalization and liquidity profile. As a result, under Moody’s environmental, social, and governance (ESG) framework, Fubon Insurance’s governance issuer profile score has been changed to G-2 from G-3 and its ESG credit impact score to neutral-to-low (CIS-2) from moderately negative (CIS-3).

The stable outlook for Fubon Insurance reflects the expectation that the insurer will maintain its leading market position, strong underwriting profitability and solid capitalization in the next 12-18 months. However, the rating could be upgraded if the insurer successfully collects most of the remaining reinsurance recoverables associated with Covid-related policies, while maintaining a local RBC ratio above 320% consistently and a return on capital (ROC) above 8% consistently or a combined ratio of its domestic business below 92% on a sustained basis. Conversely, the rating could be downgraded if the insurer’s local RBC ratio falls below 220% or profitability deteriorates substantially such that its ROC falls below 4% or the combined ratio of its domestic business exceeds 98% on a sustained basis.

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