Best’s News & Research Service - September 21, 2017 10:53 AM (EDT)
A.M. Best Affirms Credit Ratings of Samsung Fire & Marine Insurance Co., Ltd. and Its Subsidiaries
- September 21, 2017 10:53 AM (EDT)
Hong Kong //BestWire// - 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 all of these Credit Ratings (ratings) is stable.
The rating affirmations of SFM reflect its very strong risk-adjusted capitalization, profitable and stable operating performance, and favorable business profile. The company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at a very strong level in 2016. The BCAR was supported by growth in capital and surplus, which was driven mainly by net profit retention.
SFM benefits from a strong brand. Although its share of South Korea’s non-life insurance market has declined over the past five years, SFM remains by far the largest market player. The company is focused on maintaining a profitable and stable operating performance. Underwriting profitability has improved, driven by better performance in auto and long-term insurance, the company’s major business lines.
While positive rating actions are unlikely, negative rating actions could occur if there is a consistent deterioration in the company’s operating performance.
The rating affirmations of SRE reflect its solid risk-adjusted capitalization and five-year trend of favorable operating performance. A.M. Best also recognizes the wide range of support that SRE receives from SFM, given SRE’s strategic importance to SFM’s overseas expansion plan, particularly in the Asia-Pacific region.
SRE, based in Singapore, was incorporated in October 2011 and is a wholly owned subsidiary of SFM.
SRE maintains a strong risk-adjusted capitalization that benefits from low underwriting leverage and a conservative investment portfolio. SRE has demonstrated a track record of profitable results despite competitive reinsurance market conditions, as the company has reported a five-year average combined ratio of 88% with a moderate level of volatility.
These positive rating factors are offset partially by the company’s modest business profile. SRE maintains limited diversification of risks across product lines and geographies, as it generates the majority of its businesses from its group companies.
Negative rating actions could occur if SRE experiences a significant decrease in capitalization or sustained deterioration in underwriting performance.
The rating affirmations of SVI reflect its excellent risk-adjusted capitalization, strong operating performance and the support the company receives from SFM, which owns 75% of SVI’s shares.
SVI’s excellent risk-adjusted capitalization is supported by its very low level of underwriting leverage and conservative investment portfolio. The company also has reported very strong underwriting results in the past five years, due to profitable business from Samsung group companies in Vietnam. A favorable claims experience has enabled the company to secure a high margin in reinsurance commissions, despite decreases in premium rates in recent years.
Offsetting these positive rating factors is SVI’s high reliance on the premium generated from the Samsung group companies in Vietnam. Material deterioration in these companies’ performance could have a negative impact on SVI’s profile and operating performance.
While positive rating actions are unlikely, negative rating actions could occur if SVI experiences a significant decrease in risk-adjusted capitalization due to deterioration in operating results or a surge in credit risk.
The ratings of AST reflect its favorable operating performance and solid risk-adjusted capitalization, as well as the wide range of support that AST receives from SFM, its ultimate parent.
AST reported an improvement in risk-adjusted capitalization in 2016, with strong growth in its capital base offsetting increases in investment and underwriting risks. Although the company had a relatively small capital base of IDR 236 billion (USD 17.7 million) at year-end 2016, the company’s conservative retention strategy supports the current ratings.
AST primarily writes commercial risks and mainly focuses on Samsung group companies and Korean interests abroad in Indonesia. The company is profitable, as demonstrated by its five-year average operating ratio of 47% with a moderate level of volatility.
While positive rating actions are unlikely, negative rating actions could be triggered by substantial deterioration in AST’s risk-adjusted capitalization, due to material losses or a significant increase in credit risk.
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 A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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