Fubon Insurance poised for 2024 turnaround

But the company’s capital position is unlikely to return to pre-pandemic levels.

Fubon Insurance is expected to achieve a strong turnaround in 2024, with projected net profit and a double-digit return on equity, supported by improved underwriting and investment performance, according to AM Best.

Fubon Insurance’s capital position, measured by Best’s Capital Adequacy Ratio (BCAR), is expected to improve from a weak level at the end of 2023 to an adequate level in 2024. 

This improvement follows a significant capital injection from Fubon Financial Holding, which boosted the company’s consolidated capital and surplus (C&S) by 271% to $590m (TW$19.4b) in 2023. However, the capital increase was partially offset by a 

net loss of $70m (TW$2.3b), driven by unfavourable pandemic claims development and provisions for bad debts on reinsurance recoverables. 

Unaudited 2024 financials indicate further growth in non-consolidated C&S, aided by the full retention of underwriting and investment earnings. 

Despite this recovery, the company’s capital position is unlikely to return to pre-pandemic levels in the short to medium term.

The lingering risks tied to Fubon Insurance’s substantial reinsurance recoverables stem from proportional reinsurance arrangements for pandemic policies issued in 2021 and 2022, which have become a significant proportion of the company’s capital base. 

AM Best remains concerned about the potential credit risk related to the collectability and extended resolution timeline of these recoverables. 

Whilst partial bad debt provisions have been made, unfavourable outcomes in reinsurance disputes could further weaken the company’s capital position unless timely financial support is provided by Fubon Financial Holding.  

The company benefits from the parent company Fubon Financial Holding’s extensive business network and maintains a moderately diversified underwriting portfolio. 

AM Best expects this support to continue under the provisions of Taiwan’s Financial Holding Company Act.

($1.00 = TW$32.98)