The trade war between the United States and China weakened global economic demand and exports in 2019, but the overall profitability of Taiwan’s financial holding companies remained relatively strong. Fubon Financial Holdings reported net profit of NT$58.5 billion, or NT$5.46 per share, and led Taiwan’s financial holding company sector in profitability based on EPS for the 11th consecutive year.
In December 2019, Fubon Financial Holdings took a key step to strengthen its asset management business, bringing Fubon Asset Management under its corporate umbrella after it had been a wholly owned subsidiary of Fubon Securities. The move reflected the long-term strategic importance of the business to Fubon and its potential as one of the company’s most promising areas of development. We expect it will position us to integrate and better manage the resources of our asset management channels and strengthen cross-selling opportunities.
In the year to come, we will maintain our dual-track banking strategy in China featuring both a national and commercial city bank to deepen our presence in the market. Fubon Bank (China), focused on the Yangtze River Delta, the Pearl River Delta, the Beijing-Tianjin-Hebei region and major metropolitan areas in Sichuan, is the only fully licensed Taiwanese-invested bank in China and the one with the most locations. Xiamen Bank, which has 61 modern outlets, aspires to emerge as a leading regional financial services institution focused on serving SMEs on both sides of the Taiwan Strait.
Beyond deepening its presence in Taiwan, Fubon Financial Holdings will focus on strengthening its regional network. Our business in Greater China already spans banking, insurance, securities and asset management, and the goal is to optimize our wide-ranging financial department store services there while also extending our gaze to other parts of Asia. Every effort will be made to pursue opportunities for cooperation and strategic partnerships to expand our financial network through investments or acquisitions. Another priority will be to more actively cultivate overseas markets, develop customer bases, and strengthen services wherever Fubon operates to increase their overall profit contribution. These many initiatives will maximize shareholder value and help move Fubon closer to its vision of becoming one of Asia’s first-class financial institutions.
Financial Sector Leader in EPS for 11 Years Running
The U.S.-China trade war continued to depress global demand in 2019 and adversely affect some Taiwanese companies, but it also benefited Taiwan through trade diversion effects and private sector expansion of production capacity, resulting in stronger-than-expected growth in exports and fixed investment. Those trends, along with a strong showing by the stock market and public policies targeted at boosting domestic demand, fueled moderate private consumption growth, helping Taiwan’s economy improve quarter by quarter and post the highest growth of any of the four Asian Tigers.
Taiwan’s financial sector also exhibited strong growth in 2019 despite ongoing global trade disputes and the U.S. Federal Reserve’s preventive interest rate cuts. Fubon Financial Holdings remained Taiwan’s most profitable financial holding company by earnings per share for the 11th year in a row with EPS of NT$5.46 on net profit of NT$58.5 billion. 80% of that net profit was contributed by the group’s two key profit engines, Fubon Life and Taipei Fubon Bank. Return on assets and return on equity were 0.73% and 10.94%, respectively.
Assets under management reached a new high in 2019, exceeding NT$8 trillion for the first time. As of the end of the year, Fubon Financial Holdings had total assets of NT$8.55 trillion, up 11% from the end of 2018, to remain Taiwan’s second-largest financial holding company by assets.
Fubon Life: New Highs for Total Premium, Total Assets
Fubon Life delivered outstanding results through its flexible product and channel diversification strategies. Its net profit of NT$26.51 billion made it Fubon Financial Holdings’ biggest profit engine, and its first-year premium of NT$206.3 billion ranked first in the industry and total premium of NT$596.2 billion ranked second. Investible funds continued to grow, reaching nearly NT$4.4 trillion.
The life insurer continues to roll out InsurTech innovations and applications with the customer in mind, including such innovative services as the “Mobile e-Convenience” app that optimizes policyholder services and a new service that uses insurance benefits to directly offset inpatient hospital fees. Sales agents have also been helped by innovative digital support systems, including through such apps as “M+ Smart Robot” and “Policy Health Check” that integrate the M+ Messenger instant messaging service and AI technology as well as the upgraded “Mobile Agent 3.0” platform.
Overseas, Fubon Life’s Vietnam subsidiary has generated steady growth and the focus going forward will be on building an elite business team and diversified channel network to expand the business. In Korea, Fubon Hyundai Life became a Fubon Life subsidiary in September 2018 and gradually instilled the Fubon corporate culture in 2019. Efforts in the future will concentrate on improving the profitability of the business, strengthening product development and channel strategies, and engaging in pension markets. The Hong Kong subsidiary remains intent on leveraging Fubon resources to develop products that help customers accumulate wealth and protect their assets, while also building bancassurance and brokerage channels that can drive sales growth.
Taipei Fubon Bank: Better Customer Experiences through Innovation
Taipei Fubon Bank’s performance in 2019 was as strong as always despite the challenges posed by the U.S.-China trade dispute, the uncertainty created by Brexit and the protests that gripped Hong Kong. Net profit grew 8.1% to just above NT$20 billion, making the bank a key profit engine.
Several core businesses were top performers in their respective fields. The bank ranked second among private banks for outstanding personal mortgages and third in outstanding offshore institutional deposits and loans and wealth management bancassurance sales. Credit cards in circulation topped 3.29 million, helping the bank break into the top-five card issuing banks.
To deal with a rapidly changing financial environment, Taipei Fubon Bank has introduced new technologies and created new customer-oriented financial models and applications to elevate the customer experience. For consumers, Taipei Fubon Bank has developed a “Somersault Cloud” smart decision-making system to quickly respond to customers. For investors, the bank launched the “Nano Investments” smart investment platform to meet demand for a low volatility, steady investing experience. The platform has quickly emerged as Taiwan’s leading robo-advisory platform with more than NT$1.4 billion in assets. Emerging payment and blockchain applications have been another priority, with the bank launching a sandbox experiment featuring Taiwan’s first blockchain interbank transfer app.
Meanwhile, Taipei Fubon Bank actively participated in the founding of internet-only bank “LINE Bank,” which has since received regulatory approval, and it intends in the future to forge an ecosystem with strategic partners to demonstrate its industry-leading digital capabilities.
Fubon Insurance: Market Share No. 1 for 38th Year in a Row
Fubon Insurance relied on integrated marketing and diversified channel strategies to set another high for total written premium at NT$41.8 billion in 2019. That represented a market share of 23.8%, the highest in the industry for the 38th year in a row. After- tax net profit was NT$4.39 billion.
The company offers various types of agriculture insurance that give farmers and fishermen added protection beyond government subsidies against losses from natural disasters. In 2019, it continued to offer pear, rice, aquaculture and agriculture facility insurance and also pioneered Taiwan’s first banana crop insurance using aerial drone surveys. These products all contribute to Taiwan’s agriculture sustainability.
Fubon Insurance operates a growing overseas network that currently consists of subsidiaries in China and Vietnam, insurance brokerage units in Thailand and the Philippines and representative offices in Beijing, Malaysia and Indonesia. The Vietnamese subsidiary, headquartered in Ho Chi Minh City with branches in Hanoi and Binh Duong, has maintained the professional service standards seen in Taiwan in helping Taiwanese companies and local customers protect their wealth. In 2019, its written premium rose 24.7% to 563.2 billion dong.
Headquartered in Xiamen, the Chinese subsidiary has 64 service outlets spanning Fujian and Sichuan provinces and Chongqing, Liaoning and Dalian. It has embraced localized service and introduced specialized disaster- and loss-prevention technologies from Taiwan. Written premium in 2019 totaled 1.02 billion yuan in 2019, ranking ninth among 22 foreign-invested P&C insurers in China, and it had the eighth highest market share in Xiamen among all P&C companies.
Fubon Securities: Big Brokerage Advantage, Focus on New Businesses
Fubon Securities has benefited from balanced business development to emerge as one of Taiwan’s leading securities firms. In 2019 its brokerage business and overall securities lending business ranked in the top 3 in the industry, and it ranked second and third, respectively, in emerging market brokerage volume and SPO underwriting market share. The overseas bond business grew 78%, while ETF assets and outstanding general purpose loans also posted robust growth. Net profit in 2019 was NT$2.90 billion.
Fubon Securities has made financial inclusion one of its core missions, and it continues to pursue fintech development, optimize its e-trading platform and strengthen its “Robo Guardians” intelligent investment service to forge a more inclusive financial environment. New product development has also been a priority, as seen by the three new ETNs issued in 2019 that earned an industry-leading 45.3% market share, and the company’s dedication to CSR and sustainability remains unwavering. It successfully underwrote the first foreign-currency green bond issued by a non-financial company in Taiwan, which set a milestone for Taiwan’s green energy development.
Facing uncertainty from global stock markets and the U.S.-China trade dispute in 2020, Fubon Securities will work to consolidate core businesses, strengthen its wealth management services, broaden its product portfolio, optimize online services and bolster its venture capital platform as it advances toward its vision of becoming one of Greater China’s leading securities firms.
Fubon Bank (Hong Kong): All in on Open API Opportunities
Fubon Bank (China): The Strategic Partner of Taiwanese Companies
Fubon Bank (Hong Kong) faced a tough environment in 2019. The U.S. Federal Reserve cut interest rates three times and a protest movement erupted in Hong Kong in the second half of the year, hurting local consumption and slowing investment. But the bank still increased its prime loans and external investment by using the funds gained from the transfer of its stake in Xiamen Bank to Fubon Financial Holdings. At the same time, the second stage of the core banking system was completed and preparations made for the next stage, strengthening the bank’s infrastructure and efficiency. Open API was used to enable online “product and service inquiries” followed by online “product applications” – major milestones in ushering in the new era of smart banking.
Fubon Bank (China), a wholly owned subsidiary of Fubon Financial Holdings, plays a key role for Fubon as a financial services platform in the China market. With 27 branches, it has the broadest network and most service locations of any Taiwanese-invested bank in China and covers the main regions where Taiwanese businesses are concentrated, encompassing first- and second-tier cities such as Shanghai, Beijing and Chongqing and 10 provinces and municipalities.
Fubon Bank (China) performed extremely well in 2019 despite the U.S.-China trade war, volatility in international financial markets, and a slight dip in global economic growth. Deposit and loan balances set record highs, and after-tax net profit soared. Relying on the strengths of the Fubon Group, the bank has embraced the concept of “refined service” prized by Taiwan’s financial sector and worked closely with Fubon affiliates, while also introducing emerging technologies to optimize processes and boost capacity. These three pillars of product innovation, sophisticated service and greater efficiency have enabled the bank to overcome external headwinds and emerge as the ideal strategic partner for growth for Taiwanese enterprises in China.
Robust Risk Management and Balance Sheet Strength
As its business has grown, Fubon Financial Holdings has put a premium on risk management, maintaining strong balance sheet strength and a level of asset quality that exceeds the market average. Those efforts resulted in a CAR of 116.79% in 2019, well above the minimum capital requirement of 100%.
Taipei Fubon Bank was selected as a D-SIB bank in 2019, and its BIS capital adequacy ratio was 14.12% as of the end of the year, an indication of the bank’s strong capital position. Its nonperforming loan ratio was 0.19%, below the industry average (0.21%), and its coverage ratio of 709.16% far exceeded the industry average (651.78%).
Taiwan Ratings Corp. maintained its long-term and short-term ratings for Fubon Financial Holdings as “twAA” and “twA-1+,” respectively, in a report dated Nov. 22, 2019. Moody’s Investors Service maintained the company’s outlook as “stable” in its latest ratings note on Oct. 8, 2019. These ratings reflect Fubon Financial Holdings’ market leadership and its strong financial performance relative to its competitors.
The ratings of various rating agencies in 2019 were as follows:
|Rating Type||Rating Agency||Credit Rating||Outlook||Effective Date|
|International||Standard & Poor’s||BBB+||A-2||Stable||2019/11/22|
|Domestic||Taiwan Ratings Corp.||twAA||twA-1+||Stable||2019/11/22|
The Benchmark for Sustainability in Taiwan’s Financial Sector
In 2015, Fubon Financial Holdings launched the Fubon ESG Visioning Project, a sustainability initiative founded on corporate governance and the Fubon brand spirit of “positive energy.” Consisting of five strategies – leading investment, innovative finance, golden practices, honest lending and tender care – it was conceived to apply core financial competencies to environmental, social and governance issues and achieve United Nations sustainable development goals (SDGs).
Fubon Financial Holdings was the first financial institution to install an independent director system and now serves as a benchmark of board independence and diversity in Taiwan and regional markets. That leadership on corporate governance and contribution to sustainable development earned Chairman Richard M. Tsai an Asian Corporate Director Recognition Award from Corporate Governance Asia for a third time in 2019.
Corporate Governance Asia also honored Fubon Financial Holdings for “Best Investor Relations” for the ninth year running in 2019, reflecting the company’s ongoing emphasis on engaging with investors. It also made the prestigious Fortune 500 for a second year in a row and was the only Taiwanese financial holding company to make the cut.
Fubon Financial Holdings’ corporate governance performance was again widely acclaimed in 2019. Among the honors were an “Icon on Corporate Governance” award from Corporate Governance Asia for an 11th year in a row, a Platinum Corporate Award from The Asset for a ninth straight year, and a Best Initiative award in “Diversity and Inclusion,” also from The Asset. These accolades all underscored Fubon’s commitment to maintaining the highest corporate governance standards.
Widespread Honors for Fubon Subsidiaries
Fubon Financial Holdings’ subsidiaries reaped countless awards of their own in 2019. Fubon Life was named one of the Top100 Most Valuable Insurance Brands by Brand Finance for a third consecutive year and was honored as Taiwan’s Best Life Insurance Company by World Finance for the eighth straight year. It was honored by Risk Management, Insurance & Finance (RMIM) magazine as the Most Admired Life Insurance Company in the back office and field representative categories for a ninth year in a row, and garnered 17 RMIM Faith, Hope, and Love Awards for insurance – including for Insurer of the Year. It also picked up four RMIM Insurance Quality Awards.
In 2019, Taipei Fubon Bank was named Taiwan’s Best Bank for Service and Market Leader Bank for trade finance by Euromoney, and it won five honors from Global Finance, including for Best Digital Consumer Bank and Best Investment Bank in Taiwan. The Asset gave the bank four awards, including Best Private Bank in Taiwan. Domestically, Taipei Fubon Bank won a Gold Award for Banks in the Commercial Times’ Survey of Taiwan’s Service Sector and earned a Growth through Innovation Award at the Taiwan Institute for Sustainable Energy’s Taiwan Corporate Sustainability Awards.
Fubon Insurance was named the Most Admired Company in the P&C insurance sector for a 19th straight year, and was recognized as the most admired P&C insurer among new finance department graduates. It also earned several Taiwan Insurance Best Performance Awards, including for Best Public Service, Best Customer Service, Best Staff Training, Best Risk Management, and Best Promotion of Emerging Risk Protection Products, and an award from Wealth Magazine for Best Fintech Innovation. In terms of corporate governance, it was the only financial services company in Taiwan to earn a Personal Information Management Award from SGS.
Fubon Securities’ professional expertise earned it several international accolades, including awards for Best Brokerage in Taiwan and Best Initiative for Innovation – Highly Commended by The Asset. Domestically, Fubon Securities won awards for Best Wealth Management Securities Brokerage, Best Sales Team and Best Seniors-friendly Service and two other honors from Business Today, and garnered Best Fintech and Best Brokerage Image honors from Wealth Magazine.
Recognized for Sustainability around the World
The 2020 Global Risks Report issued by the World Economic Forum has warned that climate-related risks rank among the “top five risks with the greatest likelihood of long-term severe impacts.” Fubon Financial Holdings has leveraged the influence of the financial sector to bring industries, customers and supply chains together to address this daunting challenge by developing a sustainable risk management framework, promoting the Principles for Responsible Investment and adopting the Task Force on Climate-Related Financial Disclosures framework.
Fubon Financial Holdings’ balanced strategy in addressing economic, environmental and social dimensions has earned it a spot as a constituent of the Dow Jones Sustainability World Index three years in a row, twice in the FBN Diversified Financial Services and Capital Markets category and once in the Insurance category, and as a constituent of the DJSI Emerging Markets index four years running. It was also selected again as a constituent of the MSCI ESG Leaders Indexes and received an “A” MSCI ESG rating in the Life & Health Insurance category. These many honors indicate that Fubon’s ongoing sustainability initiatives have delivered results and are keeping pace with leading global companies in the field.
Fubon Financial Holdings also received an honorable mention in the financial and insurance division of Global Views Monthly’s CSR annual survey and an Excellence Award for Best Financial Holding Company CSR from Wealth Magazine. Other highlights were a “Taiwan Top 50 Corporate Sustainability Report” platinum award in the financial and insurance category for a seventh year in a row and another “Top 50 Corporate Sustainability” award.
Fubon Financial Holdings was also honored for its corporate sustainability management, earning a Taipei Energy Conservation Leadership Award from Taipei’s Department of Environmental Protection. It also received several “Sports Activist Awards” for a third straight year from the Sports Administration for its longtime sponsorship and promotion of sports in Taiwan.
The company’s longstanding dedication to ESG practices and forging a sustainable corporate culture was also recognized internationally in 2019 when it was the only Taiwanese company invited to attend the “Seminar on Environmental, Social and Governance Factors in Financial Markets” as part of the APEC Finance Ministers’ Process. In drawing international attention for its ESG efforts, Fubon Financial Holdings was able give a voice to Taiwan on a global stage.
Four Foundations: Putting CSR Ideals into Practice
The late founder of the Fubon Group, Wan-tsai Tsai, championed the idea of “giving back to society what one reaps from society.” That spirit has been carried on by the four foundations supported by Fubon Financial Holdings in harnessing positive energy for social good.
The Fubon Charity Foundation has served all corners of Taiwan for the past 31 years. In 2019, the Making Friends with Love campaign raised more than NT$110 million to help 15,845 students stay in school, and the Emergency Relief Fund provided over NT$24 million in assistance to benefit 20,968 individuals and groups. The Fubon Volunteer Association’s “Give a Wish, Build a Future” campaign fulfilled the dreams of 7,639 students while the 10 best proposals under the 2019 “Fubon Social Welfare Ambassador” program as voted by Fubon employees received additional funding for their causes.
The Fubon Cultural & Educational Foundation is dedicated to youth empowerment and media literacy and works with the Fubon Group to promote financial education and environmental sustainability. In 2019, the Young Voice initiative became a more rigorous mentorship program while the media literacy campaign focused on diversifying the film-viewing habits of high school students and strengthening their film appreciation skills. In 2020, a series of literacy-oriented courses will be developed based on the 2019 national curriculum. Meanwhile, the Future Tycoon Outreach Program imparted healthy attitudes toward money to 1,890 elementary school students, and the Fubon EDU initiative encouraged environmental education and participation in social enterprise activities.
The Fubon Art Foundation is devoted to injecting aesthetics into daily life by making them easily accessible and connecting Taiwan’s cultural soft power to the world. In 2019, the “Very Fun Park” invited eight artists to create different memories of the city, and an augmented reality app was introduced during the exhibition period to create a completely new viewing experience. The “Fubon Forum” recorded presentations and turned them into TV shows to give more people who are busy or live outside of Taipei the chance to see them. The “Fubon ART” app combined art and technology to bring art into daily life.
The Taipei Fubon Bank Charity Foundation primarily cares for the elderly and people with disabilities. In 2019, the “Fubon Sweet 60 Jiazi Cup” added a Go competition to its usual ping-pong event, drawing more than 400 seniors and playing partners to champion active aging and intergenerational harmony. The 9th Taipei Fubon Bank Artistic Achievement Awards for the Disabled were held, and the “All Love Orchestra” consisting of award winners put on a 70-minute musical titled “Us” that the audience loved.
Focus on Risk Management, FinTech Development
In the year ahead, the risks of a global economic slowdown and uncertainty in financial markets could weaken private consumption growth. But the trade diversion effects triggered by the U.S.-China trade war should still provide a boost to Taiwan’s electronics exporters and prompt companies to increase their production capacities in Taiwan. Also, increased investment from overseas Taiwanese companies and in wind power and the deployment of 5G could spur sustained fixed investment growth. This strength in exports and private sector investment should offset consumption weakness and enable Taiwan to maintain stable economic growth in 2020.
The key strategies and goals for 2020 for Fubon Financial Holdings’ main subsidiaries are as follows:
1. Fubon Life: Plans for 2020 include preparing for regulatory changes by monitoring public policies, adjusting product strategies and having channels renew their emphasis on insurance; strengthening the sale of retirement planning products and protection- and investment-oriented policies; and devising a customer/channel/employee-oriented digital blueprint that bolsters service and streamlines administrative processes to provide customers greater convenience.
2. Taipei Fubon Bank: The main focus will be on five main strategies – enhancing cross-strait cooperation, strengthening product and portfolio development, exploiting group synergies, intensifying customer segmentation, and expanding overseas networks and assets – with financial innovation at their core. The goal will be to encourage change, optimize processes, make better use of resources and provide service more efficiently to meet customer needs while respecting risk management principles to improve customer satisfaction and enhance Fubon’s brand value.
3. Fubon Insurance: Priorities for the personal insurance business include stepping up fintech development to create a full-service smart insurance assistant and devising products geared to daily living. For the corporate insurance business, the goals are to open multiple corporate insurance channels, and leverage an app to market liability insurance, create new products to cope with emerging risks, and get more channels to use marketing apps to extend their reach. Overseas, initiatives will look to forge a Southeast Asian insurance operations platform, promote cooperation on reinsurance between headquarters and overseas subsidiaries, and expand regional interaction.
4. Fubon Securities: Key plans involve deploying intelligent customer service tools, strengthening digital value-added services, and optimizing the trading platform while evolving into a wealth management securities firm; using group resources to create a “one-stop shop” securities and wealth management platform; leveraging the strengths of Taiwan’s capital markets to develop overseas asset management and investment banking opportunities; and integrating securities, futures and equity investment platforms in Greater China to provide more complete services.
5. Fubon Bank (Hong Kong): Improving ROE will be the main goal. The institutional business will focus on maintaining customer relationships and optimizing the bank’s capital structure, while retail banking will emphasize targeted digital banking services. New technologies will be used to simplify processes, improve efficiency, bolster risk management and strictly control costs, and the bank will seize on new fintech opportunities, stay on top of market needs and make use of its advantages to pioneer innovations through a diverse financial services model.
6. Fubon Bank (China): Main initiatives include deepening ties with Taiwanese businesses and better satisfying their many financial needs; optimizing the bank’s capital structure and asset quality; investing in new technologies and strengthening the bank’s technology infrastructure and innovation to drive business growth; enhancing its core competitiveness; and building the bank’s brand image as the ideal strategic financial services partner for Taiwanese businesses in China.
In the year ahead, Fubon Financial Holdings will continue to deepen its presence in Taiwan and expand regionally while strengthening risk management to secure steady, long-term growth. FinTech innovation will remain a top priority to help establish Fubon as an industry leader in financial technology, and the pursuit of good operating results will be supported by the ongoing promotion of the ESG Visioning Project. These many actions will move the company closer to achieving its vision of standing out as one of Asia’s first-class financial institutions.
Richard M. Tsai
Chairman, Fubon Financial Holdings