AM Best Affirms Credit Ratings of KB Insurance Co., Ltd.

HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of KB Insurance Co., Ltd. (KBI) (South Korea). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect KBI’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect the support that the company receives from its parent, KB Financial Group Inc. (KB Group) and its strategic importance to the KB Group.

The risk-adjusted capitalisation of KBI remained at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). Dividend payouts have remained low since 2016 and the company has paid no dividends since 2019 to reinforce its capitalisation, which has allowed it to grow capital organically through profit retention in recent years. Although its capital is exposed to moderate volatility stemming from the recent rise in long-term yields, a solid base of retained earnings and a relatively higher proportion of debt securities classified as held-to-maturity provide some capital buffer against such volatility. The company also demonstrated good access to the capital market through its initial successful issuance of subordinated bonds in 2021.

AM Best considers the company’s investment strategy as conservative with a focus on asset-liability management. A majority of its investment portfolio is placed in high-quality fixed-income assets, which is supportive of the balance sheet strength assessment of strong.

KBI’s operating performance is assessed as adequate with a weighted five-year average consolidated return-on-equity ratio of 8.4% (2016-2020) and an operating ratio of 96.4%. Despite large one-off impairment losses from its overseas alternative investment assets triggered by the COVID-19 pandemic-induced market volatility, its bottom line in 2020 was supported by improved underwriting performance, especially in the auto line as a result of cumulative rate hikes, coupled with reduced claims amid the pandemic. The company’s otherwise stable investment income remained a major source of earnings with a net investment return including gains of 3% in 2020 and a five-year average of 3.2% (2016-2020).

KBI remains the fourth-largest non-life insurer in South Korea, with a market share of approximately 13% in terms of direct premium written in 2020. KBI is a wholly owned subsidiary of KB Group, one of the largest financial holding companies in South Korea, and is also the only non-life insurer within the group. KBI is strategically important to its parent in terms of business diversification, as it helps solidify the group’s value proposition as a comprehensive financial services provider. Furthermore, the company has a track record of receiving capital support from the group. Given KB Group’s emphasis on synergy among its subsidiaries in order to provide a one-stop shopping experience to customers, KBI benefits in various ways such as shared distribution channels and group-wide marketing activities under one KB brand.

Negative rating actions could occur if there is a significant deterioration in the company’s operating performance. Negative rating actions may also arise if support from KB Group is reduced to a degree that no longer supports the current level of enhancement.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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