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FOR IMMEDIATE RELEASE
HONG KONG - OCTOBER 02, 2015 12:35 PM (EDT)
A.M. Best has affirmed the financial strength rating (FSR) of A++ (Superior) and the issuer credit rating (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 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 ICR of “a-” of SFM’s subsidiaries, Samsung Vina Insurance Co., Ltd. (SVI) (Vietnam) and PT. Asuransi Samsung Tugu (AST) (Indonesia). The outlook for all ratings is stable.
The rating affirmations reflect SFM’s excellent risk-adjusted capitalization, strong operating performance and superior business profile. SFM’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), improved in fiscal year 2014, mainly driven by an increase in unrealized gains largely stemming from its bond portfolio. Despite the tightening measures in regulatory solvency scheme, the company’s regulatory solvency ratio slightly increased to 375% at the end of December 2014 and was at 380% at the end of June 2015. SFM’s robust enterprise risk management and superior business profile support the resilience and stability of its operating results. The company maintains the largest market share in the Korean non-life insurance market and has successfully developed an alternative distribution channel to promote auto insurance products online.
Partially offsetting these rating factors are the continued low interest rate environment and intensified competition in the Korean non-life market. While the company is well-positioned at its current ratings, negative rating action may occur if there is a material deterioration in SFM’s risk-adjusted capitalization and operating performance.
SRE’s ratings reflect its profitable operating results supported by SFM’s group businesses, strong support it receives from SFM, and its adequate capitalization, measured by BCAR. SRE’s risk-adjusted capitalization improved in 2014, mainly due to the company’s increased profitability, especially from SFM’s group businesses. A.M. Best expects SRE’s capitalization level to remain stable over the next three years due to its conservative growth plan. SRE’s net profit increased substantially in 2014, its third year of operation, mainly driven by strong underwriting profitability, with a large share of premium income having been transferred from SFM in order to support the company’s growth. Moreover, SRE is a key part of SFM’s overseas expansion plan, especially in the reinsurance business in the Asia-Pacific region.
Partly offsetting factors are the softening market, with increasing competition and pricing pressure in Asia, including from the Samsung Group’s business; and the small absolute size of SRE’s capital when compared with other global reinsurers. Additionally, SRE could face volatility in operations and increased credit risk with a sizeable catastrophe event. Downward rating pressure could be triggered by significant deterioration in SRE’s risk-adjusted capitalization driven by worse than expected operating results or a material catastrophe loss.
SVI’s ratings reflect its strong risk-adjusted capitalization and highly profitable operating results. Additionally, A.M. Best recognizes the wide range of support SVI receives from SFM, which holds 75% of its shares. SVI’s risk-adjusted capitalization, measured by BCAR, improved substantially in 2014 driven by a reduction in credit risk mainly due to a decrease in reinsurance recoverable related to past large losses and an increased portion ceded to a highly rated reinsurer. Moreover, A.M. Best expects SVI to benefit from its strong operating results, driven by the business generated from the Samsung Group’s companies in Vietnam, especially from its marine and cargo line.
Partly offsetting rating factors are the substantial amount of credit risk, a reflex of SVI’s low retention level; the high dependence on a small number of clients in Vietnam, which could be strongly impacted by the withdrawal of large accounts or changes in their business strategy; and the intensifying competition in Vietnam’s non-life insurance market. Downward rating pressure could be triggered by a material deterioration in SVI’s risk-adjusted capitalization, driven by weakened operating results or a surge in credit risk.
AST’s ratings reflect the company’s adequate risk-adjusted capitalization and profitable operating performance. The ratings also consider the wide range of support AST receives from SFM, which holds 70% of its shares. Although AST’s risk-adjusted capitalization has weakened in 2014, primarily due to the increase in underwriting risk, A.M. Best expects the company to maintain an adequate level of capitalization, in view of its profitable growth based on conservative underwriting strategy. AST reported strong profitability over the past five years due to its strong investment results and profitable underwriting results. Leveraging the strong relationship with its shareholders, SFM and PT. Tugu Pratama Indonesia (TPI), AST plans to expand businesses in industries such as chemical, power and infrastructure in Indonesia.
Partially offsetting factors include AST’s historically volatile investment results and material amount of credit risk. Although AST’s investment strategy is considered conservative, having resulted in substantial profits over the past five years, it also has been influenced by fluctuations on foreign currency exchange rates, the main reason behind the strong decrease in investment income in 2014. AST is exposed to significant credit risk arising from reinsurance ceded to low-rated or non-rated entities. In 2015, AST changed its reinsurance panel by placing about half of its reinsurance domestically, in view of a new regulation proposal from the Financial Services Authority of Indonesia requiring reinsurance to be placed locally. Downward rating pressure may be triggered by a substantial deterioration in the company’s risk-adjusted capitalization, led by material operating losses or significant deterioration in credit risk.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to rating(s) 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 visit A.M. Best’s Ratings & Criteria Center.
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