HONG KONG: AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” of Fubon Insurance Co., Ltd. of Taiwan). The outlook of these Credit Ratings is stable. The ratings reflect Fubon Insurance’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management. Fubon Insurance’s risk-adjusted capitalization remained at the strongest level at year-end 2018, as measured by Best’s Capital Adequacy Ratio (BCAR). The prudent reserving practices and comprehensive reinsurance program adopted by the company continues to safeguard its capital position from undue underwriting risk, while the modest level of profit retention has contributed to partially mitigate volatility arising from capital market fluctuations over the past five years. The company’s operating results continue to be stable and positive, mainly driven by the favorable investment earnings and profitable results from its domestic underwriting portfolio, albeit partially offset by operating losses from its China operations. Fubon Insurance’s favorable business profile is underpinned by its long-term market-leading position, and solid brand recognition in Taiwan’s non-life insurance market, as well as its extensive distribution network. Going forward, AM Best expects the company’s overall market competitiveness to remain credit positive for its ratings. Offsetting rating factors includes heightened uncertainties in domestic and overseas capital market conditions, coupled with rising foreign currency hedging cost. While the company has demonstrated an improving trend in operating profitability at its overseas business in China over the past few years, the continued negative results of the overseas portfolio remain an offsetting factor to the company’s overall operating performance. Moreover, the company’s underwriting portfolio is concentrated in catastrophe-prone geographies. Positive rating actions could occur if the company demonstrates a sustainable improvement in its operating performance while maintaining robust risk-adjusted capitalization. Negative rating actions could occur if there are material capital and/or dividend payouts that lead to a substantial decline in its risk-adjusted capitalization.