HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Korean Reinsurance Company (KRE) (South Korea). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect KRE’s balance sheet strength, which A.M. Best categorizes as strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.
KRE’s strong balance sheet strength is supported by very strong risk-adjusted capitalization, moderate underwriting leverage and a conservative retrocession scheme. The company has a moderate level of underwriting leverage in terms of net premium written to shareholder funds, as more than half of net premium income comes from personal lines. The company has a conservative retrocession scheme and has gradually increased its retrocession capacity over the past five years, as evidenced by the relatively modest impact on its earnings from the recent series of catastrophe events around the world, including the hurricanes in the United States and Typhoon Hato in Hong Kong and Macau.
KRE has a track record of stable profitability, albeit with low underwriting margins in the past five years. The majority of treaties in personal lines report stable profitability, owing to loss-sensitive treaty schemes with sliding scale or profit commissions.
KRE is a dominant player in South Korea, with a market share of more than 60% in 2016. The company has some concentration in its business mix and geography, which is likely to persist even as it continues to expand in selected overseas markets.
Positive ratings action could occur if there is sustained improvement in its operating performance or material improvement in capitalization.
Negative rating actions could occur if there is a material decrease in capitalization triggered by large-scale catastrophe losses, or if there is significant deterioration in its operating performance.
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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