HONG KONG--(BUSINESS WIRE)--AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” (Excellent) of DB Insurance Co., Ltd. (DBI) (South Korea).
The ratings reflect DBI’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management.
The revision of the outlooks to positive reflects AM Best’s expectation that DBI will maintain its current favourable trend in balance sheet metrics underpinned by strong internal capital generation, including the strongest level of its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). DBI’s operating performance is expected to remain strong over the intermediate term, supported by stabilising underwriting performance and strong investment returns.
DBI’s risk-adjusted capitalisation is backed by solid growth of its capital, which reached KRW6.5 trillion (USD 5 billion) as of year-end 2020 on strong profit retention. DBI’s net underwriting and asset leverage metrics compare favourably with its domestic peers, and have trended downward over the past five years (2016-2020). The company also has a high quality of capital and prudent asset-liability management. Although its capital is exposed to moderate volatility stemming from the recent rise in long-term yields, a solid base of retained earnings is expected to provide a sufficient capital buffer against such volatility. The company has also implemented various measures for reducing capital volatility.
DBI’s strong operating performance assessment is underpinned by a five-year average return-on-equity ratio of 10.4% (2016-2020), underwriting performance that has outperformed its peers and effective investment management, as demonstrated by relatively low combined ratios and solid investment income. While its investment income continued to be a major source of earnings, underwriting performance markedly improved in 2020 when compared with the previous year. This was largely driven by improved loss experience in the auto line due to its cumulative premium hikes, combined with the favourable impact from the COVID-19 pandemic due to fewer accidents from reduced miles driven.
DBI ranks third in South Korea’s non-life insurance segment with a 17% market share in terms of direct premium written in 2020. The company’s strong brand in its domestic market, wide product offerings within non-life and life insurance through its subsidiary (DB Life Insurance Co., Ltd.) and its leadership in digital innovation in South Korea’s insurance industry support the favourable business profile assessment.
Positive rating actions could occur should DBI continue to demonstrate a positive trend in growing its sufficient capital buffer within the current strongest assessment of its risk-adjusted capitalisation, as well as favourable balance sheet indicators. Negative rating actions could occur if the company shows a prolonged negative trend in its operating performance to a level that no longer demonstrates a positive distinction from its industry peers.
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