A.M. Best Affirms Ratings of Samsung Fire & Marine Insurance Co, Ltd and Its Subsidiary

A.M. Best Asia-Pacific Limited 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 (Samsung F&M) (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). The outlook for all ratings is stable.

The ratings reflect SFM's superior risk-adjusted capitalization, sound operating performance and strong risk management.

SFM has maintained a superior capital position on both an absolute and risk-adjusted basis over the past five years, as demonstrated by its Best's Capital Adequacy Ratio (BCAR). At the end of June 2013, its regulatory solvency ratio stood at 405 percent, which is more than double the average of the other major non-life insurers and around four times the regulatory requirement of 100 percent. Given its strong buffer, the company is well positioned to weather through more stringent solvency requirement that will be implemented in the coming financial years.

Over the past five years, SFM has been successful in achieving good profitability and limiting the volatility of its operating performance by prudent underwriting and investment practices as well as a strong risk management system. Its operating ratio (combined ratio minus investment income ratio) remained stable at an average of 92 percent over the past five years, with a range from 90 percent to 93 percent.

Partially offsetting these positive ratings factors are SFM's deterioration in its auto underwriting result, the low interest rate environment and potential volatility in its capitalization due to the high proportion of its equity investment.

Negative rating actions may occur if there is a material deterioration in SFM's risk-adjusted capital position and/or operating performance.

SRE was established in 2011 with capitalization of SGD 68 million. The ratings of SRE reflect its robust capitalization, expected profitable operating results and the wide range of support it receives from SFM.

The company is expected to maintain its robust capitalization to support its current ratings primarily through strong profitability. SFM electively transferred its highly profitable accounts to SRE, which should contribute to SRE's high profitability. The transferred businesses are expected to account for more than 80 percent of SRE's total premium income. In addition, SFM provides a full range of operating support (e.g., underwriting and claim management, IT system and risk management system), which should alleviate its implementation risk as a start-up company.

A.M. Best acknowledges that SRE's capital amount is relatively small for a reinsurance start-up. Although net risk retention for a catastrophe event is considered to be low, the company could face increasing pressure on both operating volatility and credit risk in case of a catastrophe event. Accordingly, A.M. Best will continue to closely monitor the performances of SRE against its stated business plan.

Negative ratings actions could occur if SRE experiences a significant deterioration in terms of management, earnings, capitalization or risk profile.

More information:

ambest.com

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