Best’s News & Research Service - October 23, 2014 01:23 PM (EDT)
A.M. Best Upgrades Issuer Credit Rating of Dongbu Insurance Co., Ltd.
Hong Kong //BestWire// - A.M. Best has upgraded the issuer credit rating (ICR) to "a+" from "a" and affirmed the financial strength rating (FSR) of A (Excellent) of Dongbu Insurance Co., Ltd. (Dongbu) (South Korea). The outlook for the ICR has been revised to stable from positive while the FSR outlook remains stable.
The ratings reflect Dongbu's strong risk-adjusted capitalization, long-term track record of strong operating performance and stable market position. Dongbu's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), remains excellent, underpinned by strong internal capital generation, providing a sufficient buffer against an adverse stress scenario. The company consistently generates very strong operating results, as demonstrated by the profitable level of its operating ratio over the past five years. Dongbu's strong financial performance is driven by its efficient cost structure and strong investment income.
The company's market share has grown gradually over the past five years. The company secured its stable market position in the domestic non-life insurance market despite adopting a conservative growth strategy by focusing on the sale of profitable protection type products and reducing sales of saving products.
Partially offsetting these positive factors are the potential write-off from its investment into non-financial affiliates of the Dongbu Group and the compressed interest margin, as interest rates remain at a low level and close to the minimum guaranteed rates of its long term insurance line. Although the exposure to non-financial affiliates remains limited with respect to the company's capital size, further deterioration in the financial strength of the affiliates could weigh on Dongbu's operating performance.
A.M. Best believes that Dongbu is well positioned at its current rating level. Negative rating actions could follow a significant decrease in Dongbu's risk-adjusted capitalization as a result of a material deterioration in operating results. Moreover, any further indirect or direct investment into non-financial affiliates could trigger the negative rating actions.
The methodology used in determining these interactive ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Understanding Universal BCAR
- Catastrophe Analysis in A.M. Best Ratings
- Risk Management and the Rating Process for Insurance Companies
- Rating Members of Insurance Groups
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.