The world economy experienced uneven performance during 2016, with a slow, modest growth in developed markets and a noticeable deceleration in emerging markets. Several geopolitical events, including Brexit, sent shock waves throughout the global markets. Despite the challenges presented by the operating environment, Fubon Financial Holdings and its members delivered strong performances in 2016. Fubon Financial Holdings continued to be Taiwan’s most profitable financial holding company for the eighth consecutive year, with net profit of NT$48.421 billion. Earnings per share (EPS) were NT$4.73.
Volatile market conditions will continue well into 2017 with even more uncertainties and challenges. Fubon Financial Holdings, in response to the rapidly evolving digital and demographic trends, will accelerate FinTech innovation to provide customers with more personalized experiences and the most diverse, appropriate portfolio of products. The company also will leverage the combined strengths of its subsidiaries to identify and realize synergies. These strategic actions will be implemented in line with the organization’s risk policies to ensure proper governance and control.
While Fubon Financial Holdings maintains a strong presence in its home market of Taiwan, it is expanding its reach and scale throughout Asia. Fubon Life’s acquisition of a 48% stake in Hyundai Life in December 2015 enables Fubon Financial Holdings to grow its presence further beyond the Greater China region, where the company enjoys an unparalleled network that covers Taiwan, Hong Kong and China. A new branch in Singapore launched by Taipei Fubon Bank in March 2016 serves as a key entry point for the company to serve the ASEAN market. Merger and acquisition remains a key strategic option for Fubon Financial Holdings as it advances its goal to become one of Asia’s first-class financial institutions.
Industry-Leading Profitability for Eight Years Running
In 2016, economic activities in the U.S., Europe and Japan grew at a moderate pace while the Chinese economy was bolstered by monetary policy actions. In Taiwan, data for the final quarter of 2016 pointed to a strong rebound in exports, in turn driving a pick-up in business investment and capital spending. Though consumer spending lost momentum, exports and investment contributed to a recovery of the economy, with the annual rate of growth increasing to 1.5% for the full year from 0.72% in 2015.
Against a backdrop of modest economic growth, the companies within Fubon Financial Holdings posted solid sets of results for 2016. Fubon Life and Taipei Fubon Bank, Fubon Financial Holdings’ two key profit drivers, together contributed nearly 90% of the holding company’s total profit. Fubon Financial Holdings kept its top spot as the most profitable financial holding company for the eighth consecutive year, with net profit of NT$48.421 billion. EPS were NT$4.73. Return on assets and return on equity reached 0.79% and 12.19%, respectively.
In 2016, Fubon Financial Holdings continued to be Taiwan’s second-largest financial holding company by assets. Year-end assets crossed the NT$6 trillion mark to set a fresh record of NT$6.3513 trillion, 6.1% higher than a year earlier.
Fubon Life: Another Record Year for Total Premium and Assets
Fubon Life generated sustainable earnings and cash in 2016 as Fubon Financial Holdings’ top profit contributor. The insurer posted net profit of NT$28.688 billion, on the back of a well-positioned product portfolio and diversity of distribution. The volume of its total premium and first-year premium equivalent reached new highs at NT$493.6 billion and NT$103.5 billion, respectively. Its agent force increased by 4,305 to set an all-time high. With investable assets growing steadily larger over time, Fubon Life’s total assets set a fresh record of NT$3.35 trillion at 2016 year-end.
Fubon Life’s first-year premium of NT$204.3 billion and total premium of NT$493.6 billion placed the company well among the top three life insurance companies in Taiwan, for a market share of 16.1% and 15.8%, respectively.
Following Fubon Life’s acquisition in Hyundai Life in late 2015, senior managers from Fubon Life helped the South Korean insurer with its efforts to strengthen capabilities in asset management, product development and risk management. Hyundai Life made good progress in 2016 and anticipates continued improvement in operations in the future, facilitated by its ongoing partnership with Fubon Life. A subsidiary was established in April 2016 in Hong Kong, with initial goals of building Fubon Life’s distribution channels and developing savings and protection products that meet customer needs in the local market. The Hong Kong subsidiary has been gradually growing its presence and raising public awareness of the Fubon brand through working with other members of Fubon Financial Holdings.
Taipei Fubon Bank: Integration of On-Line and Off-Line Banking
The 2016 performance of Taipei Fubon Bank, a flagship company of Fubon Financial Holdings, was broadly satisfactory. The bank reported net profit of NT$14.466 billion for the year.
While China remains a major market, even more so after the acquisition of Fubon Bank (China) as a wholly-owned subsidiary, Taipei Fubon Bank is extending beyond its Greater China stronghold. The bank’s existing locations in Hong Kong and Vietnam alongside a new branch in Singapore connect Taiwanese clients with the burgeoning economies of ASEAN, facilitated by a full range of banking products and services that reflect local requirements and market conditions.
Taipei Fubon Bank in 2016 continued to evolve its retail branch network, maintaining a market-leading presence in metropolitan Taipei while expanding selectively in central and southern Taiwan. It also remodeled its existing locations, with the enhanced space and modern banking technology featured in its new branch formats improving the in-branch banking experience and strengthening brand recognition. In order to keep up with client expectations, Taipei Fubon Bank accelerated innovation, simplified its operating models, and upgraded its online and mobile banking platform allowing more personalized services to customers. As a result, Taipei Fubon Bank significantly improved the speed and simplicity of its online process for transactions, savings and deposits, mortgages, personal loans, student loans, credit cards and cross-border payment.
Fubon Insurance: 35 Years of Industry Leadership
Fubon Insurance achieved yet another record year in 2016 with written premium of NT$33.1 billion, or a market share of 22.8%. This placed the company as Taiwan’s largest property and casualty insurer for the 35th year running. Prudent underwriting practices, combined with a disciplined investment approach and rigorous risk management, enabled Fubon Insurance to generate net profit of NT$3.119 billion for the year.
Fubon Insurance runs an expanding, regional network including subsidiaries in China and Vietnam, insurance brokerage firms in Thailand and the Philippines, and offices in Beijing, China, Malaysia and Indonesia.
Fubon Property & Casualty Insurance, a China-based subsidiary of Fubon Insurance, has 50 offices in cities of Xiamen, Chongqing, Liaoning and Dalian. In 2016, the company was the sixth largest in its headquarter city of Xiamen with written premium of 1.06 billion yuan, an increase of over 20% from the prior year. Overall in China, it was ranked fifth out of 22 foreign-owned property and casualty insurers with a consistent, above-peer top line growth. Fubon Property & Casualty Insurance took sixth place out of 77 property and casualty insurers in a ranking of solvency by the China Insurance Regulatory Commission, demonstrating its ability to adapt to regulatory requirements under the second-generation solvency framework. It also achieved high satisfaction scores in national auto insurance ratings.
Fubon Securities: Innovating with Human Touch
Fubon Securities in 2016 pioneered a voice-activated mobile assistance app and fingerprint login support to its trading app. The insights into customer needs and behaviors gained through data analytics allowed Fubon Securities to serve clients with enhanced and more personalized experiences, thereby providing a major competitive advantage for the company. Despite declining trading volumes in the market, Fubon Securities remained a top-three retail broker with a 5.21% share. It led some of the year’s landmark equity and bond sales, with its underwriting excellence recognized by the IPO of the Year Award from the Taiwan Stock Exchange. Fubon Securities also strengthened its efforts at the Emerging Stock Board as the No. 2 broker for stock transactions and the No. 3 manager of capital-raising and underwriting activities by companies on the Emerging Stock Board.
Fubon Securities reached another important milestone in 2016 when it incorporated a new company, Fubon Securities Equity Investment, in Xiamen, China. This development allows Fubon Securities to expand its capital market operation to include investment in high-quality Chinese SMEs and advisory service for IPO in China. Fubon Securities looks forward to the opportunity of establishing a Chinese securities joint venture in the future, which will enable a more complete range of trading, advisory and capital-raising services while strengthening the company’s presence in Greater China.
Fubon Bank (China): Largest Taiwanese-Owned Bank in China
In October 2016, Fubon Financial Holdings received regulatory clearance to purchase the 20% interest it did not own in Fubon Bank (China) from Shanghai Pudong Development Bank, thereby making Fubon Bank (China) a wholly-owned subsidiary and enhancing the bank’s position in China. In November of the same year, Fubon Bank (China) became the first Taiwanese bank to operate on a full banking license in China after it was granted a retail banking license to serve Chinese nationals, with retail banking poised to become a key driver of the bank’s future growth.
Fubon Bank (China) has 24 offices in economically vibrant markets including the Yangtze River Delta, the Pearl River Delta, the areas surrounding Bo Sea and the western region. Fubon Bank (China) moved ahead of its Taiwan peers in May 2016 by opening a bank branch in Beijing, along with another new branch in Nanjing. In December of the same year, it launched a new branch in Chengdu. This branch alongside a branch being set up in Wuhan serves as a strategic entry point into central and western China. Fubon Bank (China) has by far the most complete geographic coverage of any Taiwanese-owned bank in China, and it is the only Taiwanese bank with operations in each of China’s four free-trade zones.
Fubon Bank (Hong Kong) remained on a solid footing in 2016 despite a difficult operating environment. The bank reported net profit of HK$635 million, up 22% compared with the prior year. Net interest income increased as net interest spread widened amid lower deposit rates and higher lending rates. After Fubon Bank (Hong Kong) became a partner of the Hong Kong subsidiary established by Fubon Life in April 2016, it experienced significant growth in bancassurance sales commissions due to a warm reception of Fubon Life’s products from local consumers.
Disciplined Risk Management and Balance Sheet Strength
As Fubon Financial Holdings continues to grow and expand, risk management remains a top priority to maintain superior asset quality and a strong capital base.
Fubon Financial Holdings issued NT$36 billion of Class-A preferred shares in April 2016. With the capital raising completed, the company’s CAR was improved to 133%, above the minimum capital requirement of 100%. Taipei Fubon Bank’s BIS was 14.4% at the end of 2016, an indication of the bank’s strong capital position. Even with steady growth in loan balances, the bank’s non-performing loan ratio stood at 0.2%, below the industry average of 0.27%, while its coverage ratio reached 652.1%, higher than the industry average of 502.93%, at the end of 2016.
In a report released on November 29, 2016, Taiwan Ratings Corp. affirmed Fubon Financial Holdings’ long-term rating as twAA and its short-term rating as twA-1+. Moody’s Investors Service, in its latest ratings note dated December 22, 2016, kept its outlook for the company at Stable. These affirmations reflect Fubon Financial Holdings’ ability to deliver above-average profitability and superior asset quality.
The ratings Fubon Financial Holdings received in 2016 are as follows:
|Rating Type||Rating Agency||Credit Rating||Outlook||Effective Date|
|International||Standard & Poor’s||BBB+||A-2||Stable||2016/11/29|
|Domestic||Taiwan Ratings Corp.||twAA||twA-1+||Stable||2016/11/29|
Exceptional Leadership in Corporate Governance
In 2016, CommonWealth Magazine named Fubon Financial Holdings Taiwan’s most admired financial holding company, the sixth time that it has topped the list. In addition, Fubon Financial Holdings ranked in the top 10 among companies across all industries for its fourth time. Fubon Life, Fubon Insurance and Fubon Securities also ranked high on the list, demonstrating an ongoing commitment of Fubon Financial Holdings and its members to creating the most value for shareholders.
Fubon Financial Holdings has a long-running dedication to policies and practices that support strong corporate governance. It was Taiwan’s first listed company to introduce an independent director system, as well as the first financial firm to have one-third of its board composed of independent directors. In 2016, Fubon Financial Holdings was ranked in the top 5% of companies for the second straight year in the annual corporate governance evaluation conducted by the Taiwan Stock Exchange, an honor acknowledging the exceptional leadership exhibited by Fubon Financial Holdings in governance. Fubon Financial Holdings, along with Taipei Fubon Bank, Fubon Life and Fubon Insurance, received the rating of Excellent under the CG6010 (2015) Corporate Governance Framework by Taiwan Corporate Governance Association. It stood out among financial institutions for having the most number of subsidiaries awarded this prestigious accreditation.
Fubon Financial Holdings’ corporate governance efforts were recognized by some of the most respected global publications. 2016 marked the company’s eighth consecutive year to be awarded The Best of Asia—Icon on Corporate Governance by Corporate Governance Asia, and the sixth straight year to be honored with The Asset Corporate Award—Platinum Award. Fubon Group Chairman Daniel M. Tsai received the Asian Corporate Director Recognition Award from Corporate Governance Asia for the seventh year running for his contributions to corporate governance, social responsibility and environmental protection.
Transparency is an important cornerstone of corporate governance. Fubon Financial Holdings was awarded Best Investor Relations in Taiwan by Corporate Governance Asia for the sixth straight year in recognition of the company’s commitment to transparency in corporate reporting.
While operational excellence remains at the heart of its organization, Fubon Financial Holdings, true to its corporate motto of “Positive Energy,” strives to create positive outcomes for business, society and the environment. Fubon Financial Holdings was awarded Best CSR in Taiwan by Corporate Governance Asia in each of the six years leading up to 2016. In Taiwan, the company was named a Silver Winner in the Financial Holding Company category by Wealth Magazine’s CSR Awards, and recognized for exemplary CSR practices in the category of Financial Services by Global Views Monthly’s 12th CSR Award. In addition, Fubon Financial Holdings received the Ten Most Sustainable Company Award, the Creativity in Communication Award, and the Top 50 Corporate Sustainability Report Gold Award in the Financial Services and Insurance category for two years running from the Taiwan Corporate Sustainability Awards.
Awards and Recognition for Subsidiaries
Notable awards received by Taipei Fubon Bank in 2016 included Best Local Private Bank and Best Local Cash Management Bank in Taiwan by Asiamoney, Digital Bank of Distinction in Asia and Best Private Bank in Taiwan by Global Finance, and Best Mobile Banking Project of the Year, Best Cash Management Bank in Taiwan and Best Trade Finance Solution in Taiwan by The Asset. Business Today magazine honored the bank for its high-quality wealth advisory services with an award for Best Professionalism in its Wealth Management Survey on Banks and Brokerage Firms. Wealth Magazine’s Taiwan Financial Award named Taipei Fubon Bank a Silver Winner for Best Bank Service and Best Digital Bank.
A five-time recipient of World Finance’s award for Best Life Insurance Company, Fubon Life earned another title in 2016 with Asia Insurance Review naming it Life Insurance Company of the Year. In Taiwan, Fubon Life was awarded second place in the Life Insurance category in CommonWealth Magazine’s Golden Service Award, as well as second place in the Insurance category of the same publication’s Most Admired Companies annual survey. Other highlights included 16 awards at the 18th Faith, Hope, and Love Awards organized by Risk Management, Insurance & Finance magazine.
Fubon Insurance has enjoyed an international reputation for operational excellence. In 2016, it was named General Insurance Company of the Year by Asia Insurance Review and Best Non-Life Insurance Company in Taiwan by Global Banking and Finance Review. Fubon Insurance also earned a staggering number of awards from Risk Management, Insurance & Finance magazine, including 12 awards at the 18th Faith, Hope, and Love Awards, as well as Best Brand, Best After-Sales Service, Best Professionalism and Most Recommended Brand in the Insurance Quality Awards.
Fubon Securities was recognized by some of the most prestigious industry awards in 2016, including Best ECM House in Taiwan by FinanceAsia, Best Brokerage House in Taiwan by International Finance Magazine and Best Initiative in Innovation and Best Equity House in Taiwan by The Asset. The Taiwan Financial Award hosted by Wealth Magazine named Fubon Securities a Gold Winner for Best Brokerage Brand, Best Brokerage Service, Best Digital Brokerage and Best Brokerage House for FinTech Innovation.
Fubon ESG Visioning Project Guided by LIGHT Strategies
In late 2015, Fubon Financial Holdings launched the Fubon ESG Visioning Project, a new initiative based on the corporate motto of “Positive Energy” and focused on a five-pronged LIGHT strategy involving “Leading Investment, Innovative Finance, Golden Practices, Honest Lending and Tender Care.” A task force was created under the Corporate Governance and Sustainability Committee to set ESG agenda and actions for the short-, mid-, and long-term horizon. The Fubon ESG Visioning Project seeks to address environmental, social and governance issues by achieving 12 Sustainable Development Goals (SDGs), including good health and well-being, climate action, quality education and sustainable cities and communities, in order to contribute to economic prosperity, the development of civil society and environmental conservation.
Fubon Financial Holdings is widely recognized for its sustainability efforts by globally renowned organizations. In September 2016, in a yearly review of component selection by RobecoSAM and S&P Dow Jones Indices, Fubon Financial Holdings was added to the Dow Jones Sustainability Indices (DJSI) Emerging Market based on a comprehensive assessment of economic, environmental and social criteria. This marked the first time a Taiwanese financial holding company was selected for the FBN Diversified Financial Services and Capital Markets. Fubon Financial Holdings was the top-scoring company in the assessment of human capital development and ranked among the top 5% in the areas of financial inclusion, codes of business conduct, risk and crisis management, climate strategy and information/cyber security. Inclusion on DJSI provides a valuable measure of the progress Fubon Financial Holdings is making in sustainability through the use of its resources and capabilities.
Four Foundations Acting as Drivers of Progress and Prosperity
Wan-Tsai Tsai, the late founder of the Fubon Group, was a champion of the spirit expressed in the Chinese idiom of “plough back to the community whatever is due to the community.” Fubon Financial Holdings’ four foundations serve as important platforms through which the company carries out its CSR activities and projects. In addition, the Fubon Volunteer Association and policies such as paid volunteering leave have been put in place to encourage employees to contribute their time and skills toward improving the communities they live in.
The Fubon Charity Foundation in 2016 raised more than NT$113 million for Making Friends with Love, a program that helped 15,819 students continue their studies. Another program, Fubon Social Welfare Ambassador, benefited 87 nonprofits that provide social and community services. During the year, 3,528 employees contributed 25,535 hours of service in activities planned by the Fubon Volunteer Association.
The Fubon Cultural & Educational Foundation offered the Future Tycoon Outreach Program to 134 primary schools during 2016 to teach children about basic financial knowledge, with tools specifically designed to facilitate learning. It also organized workshops to increase the teachers’ level of financial literacy. Fubon EDU, a project initiated jointly with social enterprises, offered hands-on experience in farming to 3,894 Fubon Group employees and their families and friends in its support of sustainable agriculture.
The Fubon Art Foundation, for its first time, created encounters with art in a hotel setting. Folio Daan Taipei, as the hotel partner for the foundation’s new residency program, hosted an impressive collection of contemporary art by 8 artists in its public areas and provided accommodation to 6 artists to support their experimentation and development of new ideas. Fubon Forum, in its 16th year, has invited 755 speakers to share their insights into the aesthetics of everyday life in 1,787 lectures since its inception, attracting an audience of more than 180,000.
The Taipei Fubon Bank Charity Foundation organized 286 support group meetings and respite events for 5,635 family caregivers in the year as part of its larger effort to support and advocate for family carers. Beyond the Limits of the Possible, an exhibition of 60 paintings, handicraft and other arts made by 23 past award winners of the Artistic Achievement Awards for the Disabled, provided people with disabilities an opportunity to showcase their creative talent.
Local Root, Regional Reach
For the year ahead, economic growth is expected to continue at a moderate pace driven by expansionary monetary policy implemented by the world’s major economies, stabilization of commodity prices and increased trade activity. That, coupled with the iPhone 8 release, will help drive a recovery in Taiwan’s exports. Economic and geopolitical developments such as U.S. President Donald Trump’s stance on trade, key elections in the eurozone and China’s credit issues may, however, negatively impact the sentiment of business investment. Weakness in domestic demand—a result of slow wage growth, rising inflation and subdued consumer spending—will likely be offset by improving exports. All in all, Taiwan’s economic growth in 2017 will be faster than 2016.
A description of the strategic actions Fubon Financial Holdings’ key subsidiaries will implement in 2017 is provided below:
1. Fubon Life: Plans for 2017 include promotion of retirement income products and long-term care plans in response to major demographic trends, including singlehood, low total fertility rate, ageing and longer life expectancy; the development of benefits-in-kind insurance that meets clients’ specific objectives and new insurance policies that give customers discounts on policy premiums if they achieve pre-determined physical fitness targets; continued implementation of its annual recruitment program to expand service to rural and underserved areas; digital innovation and training to increase the ability of sales representatives to use technology; and continuation of a program that advocates for elder patients with dementia.
2. Taipei Fubon Bank: Priorities for 2017 include expanding client assets and enhancing portfolio performance; increasing the scale of operations and improving rates of return; utilizing the strength of its international network to acquire new clients; focusing on bank branches as the primary platform for enhancing interactions with customers and delivering locally tailored services; using data analytics to develop products that match customer needs and to achieve targeted marketing; increasing social media engagements and digital channel marketing to accelerate external customer acquisition; strengthening risk management capabilities; and focusing on the human element of customer service.
3. Fubon Bank (Hong Kong): Key actions for 2017 involve increasing the number of high-quality clients, creating a banking center for SMEs, and positioning its branches as community-based banking centers in order to become the primary banking choice for local customers; providing premium products and services under the Ambassador Banking proposition aimed at high-net-worth individuals; cooperating with Fubon Life on product development; transforming the head office in Central District into an iBranch, promoting paperless transactions in smaller branches, and installing two interactive teller machines, the i-Tellers, in less populated areas to improve access to service and support.
4. Fubon Bank (China): Plans for 2017 include increasing access to capital for Taiwanese corporations that operate in China, especially service companies that compete in the so-called experience economy; growing cross-border business specifically within China’s free-trade zones; targeting mass affluent customers as its primary customer segment for retail banking and the growing middle class as the focus area for future growth; developing both on-line and off-line products and solutions to help consumers meet personal financial goals; capitalizing on the opportunities provided by the rapid growth of e-commerce and big-data analytics to grow payment and transaction services.
5. Fubon Insurance: Main initiatives include encouraging the use of mobile app platforms for sales representatives and claim professionals to increase efficiency and flexibility in performing tasks and communicating with customers; adding more three-year health and accident insurance policies to the product line-up following loosened regulations on such products; using reinsurance to limit losses from catastrophe; helping clients improve their catastrophe risk analysis and management and implement loss prevention measures; promoting disaster recovery service as a means of minimizing the disruption of operations and property loss; and strengthening its brand as a trustworthy partner and a leader in risk management.
6. Fubon Securities: Goals set out for 2017 include consolidating its market position in retail brokerage; building its wealth management business and diversifying its product portfolio; exploring opportunities in the 10 high-potential, strategic industries supported by the government and providing advisory and strategic planning services for high-quality IPO prospects; expanding presence in the Greater China market and meeting demand for financial advisory services that arise from the Taiwan government’s new southbound policy; issuing warrants on popular stocks and on ETFs offered by Fubon Asset Management as the underlying asset.
Looking ahead, Fubon Financial Holdings is in a strong position to continue its expansion in Asia and strengthen its market-leading position in Taiwan. It is also taking advantage of the digital opportunities facing the company by innovating the way it interacts with and delivers financial services to customers. While operational excellence is one of its top goals, Fubon Financial Holdings will achieve it by maintaining sound environmental, social and governance practices as promoted by its ESG Visioning Project. These actions will contribute toward the company’s long-term success and its vision to become one of Asia’s first-class financial institutions.
Fubon Financial Holdings Chairman Richard M. Tsai
Fubon Financial Holdings Vice Chairman Daniel M. Tsai