HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of KB Insurance Co., Ltd. (KB Insurance) (South Korea). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect KB Insurance’s balance sheet strength, which A.M. Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also consider the strategic importance and support KB Insurance receives from the parent company, KB Financial Group Inc. (KB Group).
KB Insurance’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is at the very strong level. The company has a conservative investment portfolio and growing capital and surplus, having benefited from improved profitability and a relatively low dividend payout ratio. Asset leverage has declined over the past five years but remains high, exposing the company’s capital and surplus to asset valuation change.
KBI’s operating performance has improved over the past five years albeit with moderate volatility. The improvement was driven mainly by increasing net investment income. The company’s combined ratio, which had underperformed its major peers historically, has caught up over the past three years. However, the company’s overall operating performance still trails its major peers.
KBI is the fourth-largest non-life insurer in South Korea. The company benefits from the KB brand and from being a wholly owned subsidiary of the KB Group. Nevertheless, KBI’s overseas business profile is limited, and in particular, the company’s U.S. business has struggled with poor operating performance for the past years.
A.M. Best considers the company’s risk management capabilities as appropriate for its risk profile. KB Insurance has been improving its risk management framework as it prepares for upcoming regulatory changes. The company benefits from the group’s risk management expertise and its integrated ERM.
KB Insurance is important to the group in terms of business diversification and enables the group to provide a wider range of financial services. The group provided KB Insurance with capital support in 2015 and 2016, and turned it into a wholly owned subsidiary in 2017. KB Insurance also benefits from implicit support in areas such as investment, human resources and business infrastructure.
Positive rating action is unlikely in the near term. Negative rating actions could occur if there is a material deterioration in the company’s risk-adjusted capitalization. Negative rating actions could occur if there is a significant decline in the parent company’s financial strength and credit 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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