HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa+” of Samsung Fire & Marine Insurance Co., Ltd. (SFM) (South Korea). Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of SFM’s wholly owned subsidiary, Samsung Reinsurance Pte. Ltd. (SRE) (Singapore). A.M. Best also has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” of SFM’s subsidiaries, Samsung Vina Insurance Co., Ltd. (SVI) (Vietnam) and PT. Asuransi Samsung Tugu (AST) (Indonesia). The outlook of these Credit Ratings (ratings) is stable.
The affirmations of the FSR and the Long-Term ICR of SFM reflect its very strong risk-adjusted capitalization, and favorable operating performance and business profile. SFM’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at a very strong level in fiscal-year 2015. Capital and surplus growth, driven by profit retention, offset additional capital requirements related to net premium growth and an increase in investment risk over the same year.
SFM has retained the largest market share in South Korea’s domestic non-life insurance market while maintaining a favorable and stable operating performance. In long-term insurance, which is the company’s largest business line, the proportion of profitable protection-type products increased in 2015. Concurrently, the persistency ratio of protection-type products continued to improve over the same year. SFM’s underwriting profitability particularly has improved in the auto line of business, reflecting the company’s initiatives to optimize customer segmentation, based on its large database, and to actively adjust premium rates accordingly.
Partially offsetting these positive rating factors are the continued low interest rates that negatively affect the profitability of long-term insurance.
While positive rating actions are unlikely, negative rating actions could occur if there is material deterioration in SFM’s operating performance.
SRE was established in 2011 with capital of SGD 68 million (USD 50 million). The affirmations of the FSR and the Long-Term ICR of SRE reflect its sound risk-based capitalization, as measured by BCAR, profitable operating results and the support the company receives from SFM.
SRE’s risk-adjusted capitalization improved in 2015, as its capital and surplus grew stronger than its underwriting risk, owing to profitable results based on a conservative underwriting strategy. In addition, SRE receives a wide range of support from SMF given SRE’s strategic importance to SFM’s overseas expansion plan, particularly in the Asia-Pacific region. SRE is a reinsurer that writes most of the group’s business from affiliates in the Asia-Pacific region.
Offsetting rating factors are SRE’s relatively small absolute capital size of SGD 90 million (USD 66 million) as of year-end December 2015, and the ongoing intense price competition in the reinsurance market. In addition, SRE will require time to increase its market penetration in the various Asian reinsurance markets where it writes business, which limits its business profile as a regional reinsurer.
While positive rating actions are unlikely, negative rating actions could occur if SRE experiences significant deterioration in its risk-adjusted capitalization led by material underwriting losses or more aggressive growth than SRE’s plan stated.
The affirmations of the FSR and the Long-Term ICR of SVI reflect its strong risk-adjusted capitalization, as measured by BCAR, profitable underwriting results and the support the company receives from SFM, which owns 75% of SVI’s shares.
Although SVI’s risk-adjusted capitalization decreased in 2015 due to an increase in credit risk associated to reinsurance recoverables, the level remains supportive of the current ratings. SVI reported very strong underwriting results in the past five years, owing to profitable businesses from the Samsung group companies in Vietnam. Favorable claims experiences have enabled the company to secure a high margin in reinsurance commissions.
Partly offsetting rating factors are the potential exposure to large reinsurance credit risk due to low retention and high reliance on the premium generated from the Samsung group companies in Vietnam. SVI’s profile and operating performance could be negatively impacted if there is material deterioration in the Samsung group companies' performance.
While positive rating actions are unlikely, negative rating actions could occur if SVI experiences significant deterioration in its risk-adjusted capitalization driven by weakened operating results or a surge in credit risk.
The affirmations of the FSR and the Long-Term ICR of AST reflect its adequate risk-adjusted capitalization and profitable operating performance. Additionally, A.M. Best recognizes the wide range of support AST receives from SFM, which holds 70% of its shares.
AST’s risk-adjusted capitalization strengthened in 2015, primarily due to a decrease in credit risk attributed to a decline in reinsurance receivables, steadily growing underwriting profits and strong investment income for the year. Leveraging the strong relationship with its shareholders, SFM and PT. Tugu Pratama Indonesia (TPI), AST is able to underwrite profitable Samsung group companies and other Korean companies’ overseas business.
Partially offsetting rating factors include AST’s historically volatile investment results caused by the exposure to USD-denominated assets. Although AST’s investment strategy is very conservative and has accumulated profits over the past five years, the large exposure to USD-denominated assets brought volatile investment results caused by currency rate fluctuations.
While positive rating actions are unlikely, negative rating actions could be triggered by substantial deterioration in AST’s risk-adjusted capitalization, led by material operating losses or significant deterioration in credit risk.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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