CONTACTS:
FOR IMMEDIATE RELEASE
HONG KONG - SEPTEMBER 21, 2018 11:49 AM (EDT)
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 Construction Guarantee Cooperative (CG) (South Korea). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CG’s balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
CG’s balance sheet strength is underpinned by its risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Its robust capitalization is supported by a large capital base and low underwriting leverage.
CG has maintained a highly profitable operating performance over the past five years. Underwriting performance improved in 2016 and 2017 through the company’s efforts to improve claims management and tighten its underwriting process. Investment income, which mostly consists of interest income, brings a stable profit stream to the company while underwriting performance remains volatile because of the nature of the surety business.
CG is a cooperative organization specializing in writing surety bonds for its members, which are general construction companies in South Korea. As a government-designated provider of surety bonds for general construction companies, CG has maintained a dominant market share in South Korea over the long term. In addition, CG is under the supervision and control of South Korea’s Ministry of Land, Infrastructure and Transport and executes government policies that support the construction industry.
CG’s risk management capabilities are considered appropriate given its risk profile. CG has implemented a comprehensive ERM structure to effectively manage its key risk areas, including a sophisticated credit assessment and monitoring process of its members.
Negative rating actions could occur if CG’s risk-adjusted capitalization materially deteriorates due to significant accumulation of claims caused by a prolonged recession in the construction industry.
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.
A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry.