HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” (Superior) of Samsung Fire & Marine Insurance Co., Ltd. (SFM) (South Korea) and its subsidiaries, Samsung Fire & Marine Insurance Company of Europe Limited (United Kingdom), Samsung Vina Insurance Co., Ltd. (Vietnam), and Samsung Reinsurance Pte. Ltd. (Singapore). Concurrently, AM Best also has affirmed the FSR of A- (Excellent), the Long-Term Issuer Credit Rating of “a-” (Excellent), and the Indonesia National Scale Rating (NSR) of aaa.ID (Exceptional) of PT Asuransi Samsung Tugu (AST) (Indonesia). The outlook of the aforementioned Credit Ratings (ratings) is stable.
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).
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 support provided by AST’s parent, SFM.
SFM’s risk-adjusted capitalisation is expected to remain comfortably at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by its robust absolute capital base of KRW 16.1 trillion (USD 12.4 billion) as at year-end 2023. The company continues to report the highest regulatory solvency ratio among its non-life peers in South Korea even after transition to a more stringent solvency regime. While SFM’s capital is exposed to certain volatility resulting from interest rate movements and the changes in market value of its affiliated stock holdings, its risk-adjusted capitalisation has demonstrated strong resilience to various capital market stress scenarios. SFM’s balance sheet strength also is supported by its debt-free position, low level of underwriting leverage and conservative investment strategy.
SFM has a long-term track record of strong operating performance supported by a highly stable underwriting performance with a low combined ratio compared with its domestic peers, and robust investment income generated from its large asset base. The company’s large profitable book of existing policies and strong capability to generate a new business contractual service margin, which is a source of future profit, are expected to allow SFM to hold its lead in long-term insurance line performance. The company’s auto line has remained profitable owing to various underwriting initiatives, favourable regulations and the acquisition-related cost efficiency from its online channel. The general insurance line is also expected to support the company’s bottom line with an improvement in its overseas business performance.
SFM is the market leader in South Korea’s non-life sector with approximately 22% market share in terms of gross insurance service revenue in 2023 and has superior brand power being a part of the wider Samsung Group. The company has strong control over its distribution through a large network of tied agents for its long-term insurance and via its market-leading online channel for auto insurance. Specifically, SFM maintains a strong leadership role in the rapidly growing online auto insurance segment with a high-quality customer base and an immense amount of data and knowledge that it has accumulated as the pioneer in this area. The company also benefits from its affiliation with Samsung Group by underwriting group-related business in South Korea and overseas, which serves as a good source of profits in its general insurance line with very favourable loss ratios.
As part of its long-term vision for global expansion, SFM has been cautiously pursuing inorganic growth and partnerships in overseas markets over the past few years. SFM’s recent ventures include an investment in Canopius Group Limited and its business partnership in the U.S. market, as well as an initiative to turn its China subsidiary into a joint venture with Tencent Holdings Limited and tap into that country’s online personal lines segment more effectively.
With a sophisticated risk management culture and framework that are entrenched in the organisation, AM Best views SFM’s risk management capabilities as superior to those of its domestic and international peers with similar risk profiles.
AST’s risk-adjusted capitalisation is assessed at the strongest level, as measured by BCAR and is expected to remain so over the intermediate term. The company’s balance sheet strength is supported by its low net underwriting leverage and conservative and liquid investment portfolios, which partially offset AST’s small absolute capital base. Moderately high credit risk derived from its sizeable reinsurance exposure to domestic (re)insurers is mitigated partially by affiliated and international reinsurance partners of high credit quality and strict counterparty monitoring by SFM.
AST’s strong operating performance is supported by its highly profitable underwriting and a stable stream of investment income as evidenced by a five-year average combined ratio of 28.3% (2019-2023) and a return-on-equity ratio of 9.4%. The company’s underwriting performance is mainly driven by its low expense ratio, which is attributable to large reinsurance commission income and low acquisition costs from the direct distribution channel. AST has historically benefitted from highly profitable Samsung group risks and relatively favourable loss ratios of Korean Interest Abroad (KIA) business compared with local Indonesian business.
AST is a joint venture between SFM and PT Asuransi Tugu Pratama Indonesia Tbk, which have 70% and 30% shareholding, respectively. AST mainly focuses on underwriting risks related to Samsung group affiliates and other Korean companies in Indonesia, which AM Best expects to remain largely unchanged over the medium term. AST’s exposure to Indonesia’s domestic market remains small given its limited access as a foreign player and SFM’s strict underwriting guidelines. AST shares the Samsung brand and is highly integrated into its parent, receiving support in various areas such as key personnel, underwriting, marketing, risk management and reinsurance.
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 also could arise if there is a significant deterioration in the company’s risk-adjusted capitalisation. While it is thought to be unlikely, positive rating actions could occur if SFM’s operating performance demonstrates exceptionally strong and consistent results.
Negative rating actions could occur for AST if support from SFM is reduced to an extent that no longer supports the current level of rating enhancement. Negative rating actions also could arise if there is a sustained deterioration in AST’s operating performance, or its risk-adjusted capitalisation significantly deteriorates such as from heightened credit risk following major loss events due to its high reinsurance dependency. Positive rating actions could occur if there is a notable and sustained expansion of AST’s market presence leading to an improved business profile.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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