The affirmations of the FSR and the Long-Term ICR of SFM reflect its very strong risk-adjusted capitalization, and favorable operating performance and business profile. SFM’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at a very strong level in fiscal-year 2015. Capital and surplus growth, driven by profit retention, offset additional capital requirements related to net premium growth and an increase in investment risk over the same year.
SFM has retained the largest market share in South Korea’s domestic non-life insurance market while maintaining a favorable and stable operating performance. In long-term insurance, which is the company’s largest business line, the proportion of profitable protection-type products increased in 2015. Concurrently, the persistency ratio of protection-type products continued to improve over the same year. SFM’s underwriting profitability particularly has improved in the auto line of business, reflecting the company’s initiatives to optimize customer segmentation, based on its large database, and to actively adjust premium rates accordingly.
Partially offsetting these positive rating factors are the continued low interest rates that negatively affect the profitability of long-term insurance.
While positive rating actions are unlikely, negative rating actions could occur if there is material deterioration in SFM’s operating performance.
SRE was established in 2011 with capital of
SRE’s risk-adjusted capitalization improved in 2015, as its capital and surplus grew stronger than its underwriting risk, owing to profitable results based on a conservative underwriting strategy. In addition, SRE receives a wide range of support from SMF given SRE’s strategic importance to SFM’s overseas expansion plan, particularly in the
Offsetting rating factors are SRE’s relatively small absolute capital size of
While positive rating actions are unlikely, negative rating actions could occur if SRE experiences significant deterioration in its risk-adjusted capitalization led by material underwriting losses or more aggressive growth than SRE’s plan stated.
The affirmations of the FSR and the Long-Term ICR of SVI reflect its strong risk-adjusted capitalization, as measured by BCAR, profitable underwriting results and the support the company receives from SFM, which owns 75% of SVI’s shares.
Although SVI’s risk-adjusted capitalization decreased in 2015 due to an increase in credit risk associated to reinsurance recoverables, the level remains supportive of the current ratings. SVI reported very strong underwriting results in the past five years, owing to profitable businesses from the Samsung group companies in
Partly offsetting rating factors are the potential exposure to large reinsurance credit risk due to low retention and high reliance on the premium generated from the Samsung group companies in
While positive rating actions are unlikely, negative rating actions could occur if SVI experiences significant deterioration in its risk-adjusted capitalization driven by weakened operating results or a surge in credit risk.
The affirmations of the FSR and the Long-Term ICR of AST reflect its adequate risk-adjusted capitalization and profitable operating performance. Additionally,
AST’s risk-adjusted capitalization strengthened in 2015, primarily due to a decrease in credit risk attributed to a decline in reinsurance receivables, steadily growing underwriting profits and strong investment income for the year. Leveraging the strong relationship with its shareholders, SFM and PT. Tugu Pratama Indonesia (TPI), AST is able to underwrite profitable Samsung group companies and other Korean companies’ overseas business.
Partially offsetting rating factors include AST’s historically volatile investment results caused by the exposure to USD-denominated assets. Although AST’s investment strategy is very conservative and has accumulated profits over the past five years, the large exposure to USD-denominated assets brought volatile investment results caused by currency rate fluctuations.
While positive rating actions are unlikely, negative rating actions could be triggered by substantial deterioration in AST’s risk-adjusted capitalization, led by material operating losses or significant deterioration 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.
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