FUBON FINANCIAL HOLDING CO., LTD.
Fitch Ratings has assigned an 'A+(twn)' rating to
The subordinated securities represent Fubon Life's direct, unsecured and subordinated obligations. The net proceeds will be used to strengthen its working capital and risk-based capital ratio.
Fitch has simultaneously assigned Fubon Life's Long-Term Issuer Default Rating of 'BBB+' and National Long-Term Rating of 'AA-(twn)'. The Outlooks are Stable.
Key Rating Drivers
The securities are rated one notch below Fubon Life's National Long-Term Rating of 'AA-(twn)' to reflect Fitch's assumption of 'Below Average' recovery prospects for subordinated securities issued at an operating entity in the event of a default. The subordinated securities rank in line with all other present subordinated obligations with cumulative features of the issuer, but rank ahead of the rights of the shareholders' equity.
The rated securities will have a fixed maturity period of 10 years. There is no additional notching for non-performance risk, as Fitch views this risk as minimal. Management has no discretionary option to defer interest payments, even if the issuer does not meet the minimum regulatory solvency requirements.
Fitch applies its 'regulatory override' to the extent that these securities are afforded equity credit for regulatory solvency purposes, and similarly classifies the same extent of these securities as 100% equity capital in the capital adequacy assessment. However, the securities are classified as 100% debt in Fitch's financial leverage calculations, as they are dated securities. The issuance will increase Fubon Life's financial leverage. Nonetheless, Fitch estimates the ratio will remain commensurate with its existing ratings, even after the issuance.
RATING SENSITIVITIES
The rating on the securities will move in tandem with Fubon Life's National Long-Term Rating.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Failure to maintain a 'Strong' capital score, as measured by the Fitch Prism Model;
Decline in profitability, with return on equity falling to 9% for a sustained period.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Significant decrease in risky-assets ratio for a prolonged period;
Improvement in the Fitch Prism Model score well into the 'Strong' category or above on a sustained basis.
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg
(C) 2023 Electronic News Publishing, source
