AM Best Affirms Credit Ratings of Samsung Fire & Marine Insurance Co., Ltd. and Its Subsidiaries
AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa+” (Superior) of Samsung Fire & Marine Insurance Co., Ltd. (SFM) (
The ratings of SFM reflect its balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, very favourable business profile and very strong enterprise risk management (ERM).
SFM’s risk-adjusted capitalisation is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by its substantial absolute capital and surplus that totaled
SFM’s strong operating performance is underpinned by its large absolute net income stream that is supported by robust investment profits, outstanding and stable underwriting performance, and the lowest combined ratio among its domestic peers. After a deterioration in 2019 with an industry-wide rise in auto and medical claims, SFM’s underwriting performance improved in 2020 and the first half of 2021, mainly driven by favourable auto line performance following a series of rate increases and reduced claims frequency amid the COVID-19 pandemic. Investment profits continue to be robust, supported by substantial volume of investment assets.
As the leader in South Korea’s non-life insurance segment with a market share of approximately 23% in terms of gross premium written (GPW) in 2020, SFM has superior brand power and a large captive agent distribution network, as well as highly diversified product offerings. SFM demonstrates especially strong leadership in the rapidly growing online auto insurance line with a high-quality customer base and an immense amount of data and knowledge that it has accumulated as the pioneer in this area. AM Best also notes that the Samsung Group’s related business in
Notwithstanding its limited presence in overseas markets, the company has been cautiously pursuing global expansion through inorganic growth and partnership; SFM’s most recent ventures include its investment in
With a group risk management culture entrenched in the organisation and a robust governance structure, SFM’s risk management capabilities are superior to its domestic and international peers with similar business profiles.
The ratings of SRE reflect its balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate ERM. These ratings also recognise the high degree of integration and wide range of implicit and explicit support the company receives from SFM.
SRE’s risk-adjusted capitalisation is assessed at the strongest level, as measured by BCAR, and is expected to remain at a similar level over the medium term. Although its capital and surplus has demonstrated a stable growth trend with full profit retention over the past years, the company’s absolute capital base of
SRE’s operating performance has been mostly profitable, with a five-year average return-on-equity ratio of 3.5% (2016-2020) and a combined ratio of 91.2%, although there has been historically moderate volatility in its underwriting performance, mainly driven by changing business strategy and small net premium base. Its underwriting performance is underpinned by a relatively low loss ratio compared with peers, as the company benefits from highly profitable captive business from the Samsung group. The company has been cautiously growing third-party treaty business in recent years, of which the share increased to 28% of GPW in 2020, exhibiting moderate profit volatility. SRE reported a favourable underwriting performance in 2020 with a combined ratio of 81%, mainly driven by an enlarged net premium base under a new retention strategy and decreased captive cargo claims amid the COVID-19 pandemic. Its five-year average net investment yield is low compared with its regional peers due to its highly conservative investment strategy.
SRE is a small reinsurer mainly focused on
As a wholly owned subsidiary of SFM and the only reinsurer within the group, SRE shares the Samsung brand and is strategically important to SFM as an integral part of its global expansion and business diversification into reinsurance. Given the high level of integration with the group, SRE receives a wide range of support from SFM in areas such as retrocession, actuarial, underwriting, pricing, risk management and technology.
The ratings of AST reflect its balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate ERM. These ratings also recognise the wide range of implicit and explicit support provided by AST’s parent, SFM.
AST’s risk-adjusted capitalisation is assessed at the strongest level, as measured by BCAR, supported by its low net underwriting leverage and a highly liquid investment portfolio, which partially offsets its small capital base of
AST has a track record of strong operating performance, underpinned by profitable underwriting and stable investment activities, as demonstrated by a five-year average return-on-equity ratio of 10.2% (2016-2020) and a combined ratio of 68.9%. AST’s strong underwriting performance is driven principally by its low expense ratio, attributed to a large ceding commission income coupled with low acquisition costs from the direct distribution channel. Deterioration in its loss ratio in 2020 due to a couple of large unprecedented claims was offset mostly by an improved expense ratio driven by increased ceding commissions and reduced management expenses. AST’s net premium base has decreased, caused by the declining volume of
AST is a joint venture between
AST shares the Samsung brand and is highly integrated into its parent, receiving support in various areas including marketing, pricing, underwriting and risk management. The company also receives direct reinsurance support from SFM.
The ratings reflect SVI’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate ERM. These ratings recognise the wide range of implicit and explicit support provided by SVI’s parent, SFM.
SVI’s balance sheet strength is underpinned by its very low underwriting leverage and strong internal capital generation, which partially offset its relatively small capital base of
SVI has a track record of strong operating performance with a five-year average return-on-equity ratio of 14.9% (2016-2020) and a combined ratio of -88.3%. The company’s strong underwriting performance is driven mainly by its large reinsurance commission income, reflecting SVI’s fronting insurance business model. Although slightly volatile given its small premium base, its favourable loss experience, as evidenced by a five-year average loss ratio of 26.3% (2016-2020), is due in large part to highly profitable captive business from Samsung group-related risks. A solid stream of interest income provides additional stability to SVI’s overall bottom line.
SVI has an approximate 2% share of Vietnam’s non-life insurance market, based on GPW in 2020. The company has limited exposure to its domestic market, with most of its revenue generated by
SVI’s ERM system, which is part of SFM’s global governance system, is well-developed and in line with the parent’s risk framework and appetite.
SVI is 75% owned by SFM, shares the Samsung brand name and is highly integrated into its parent company. SFM continually provides support to SVI in major areas such as marketing, actuarial, underwriting and risk management. Furthermore, SVI is strategically important to SFM because it offers coverage to
Negative rating actions could occur for SFM if there is a continuous deteriorating trend in its operating performance to a level that no longer supports the current strong assessment. Negative rating actions could also occur if there is a significant deterioration in its risk-adjusted capitalisation.
Negative rating actions could occur for SRE if there is a deterioration in its operating performance arising from a continued unfavourable trend in its underwriting performance. Negative rating actions may also arise if support from SFM is reduced to an extent that no longer supports the current level of enhancement.
Negative rating actions could occur for AST if there is a sustained deterioration in its operating performance, such as increased underwriting volatility with large scale accident claims while the net premium base remains contracted, or if support from SFM is reduced to an extent that no longer supports the current level of enhancement.
Negative rating actions could occur for SVI if the company’s operating performance should deteriorate materially, for example due to an increased frequency of large-scale loss events. Negative rating actions also may arise if support from SFM is reduced to an extent that no longer supports the current level of enhancement.
AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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 AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in
Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Source: AM Best
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