HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of KB Insurance Co., Ltd. (KBI) (South Korea). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect KBI’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect the support that the company receives from its parent, KB Financial Group Inc. (KB Group) and its strategic importance to KB Group.
KBI’s risk-adjusted capitalisation has remained at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s solid base of retained earnings, supported by full profit retention, provides some buffer against the recent pressure on its capital due to the impact of the rapid interest rate rises on available-for-sale bond valuations. Other balance sheet strength considerations include KBI’s good accessibility to the capital market, which was demonstrated by the recent issuances of subordinated bonds, and its conservative investment strategy.
KBI’s operating performance is assessed as adequate with a weighted five-year average consolidated return-on-equity ratio of 7.8% (2017-2021) and an operating ratio of 96.6%. The company’s underwriting performance improved materially in 2021 and in the first half of 2022, mainly driven by favourable auto line performance as a result of prior rate increases and reduced claims frequency amid the prolonged COVID-19 pandemic, as well as an improved expense ratio. Investment income continues to be a major source of earnings for KBI with a stable trend in its net investment returns.
As a wholly owned subsidiary of KB Group, one of the largest financial holding companies in South Korea, KBI remained the fourth largest non-life insurer in South Korea with a stable market share of approximately 13%, based on gross premium written in 2021.
Being the only non-life insurer within the group, KBI is strategically important to its parent in terms of business diversification as it enables the group to become a comprehensive financial services provider. Explicit support includes a track record of direct capital support since its affiliation to the group in 2015 and a no-dividend policy in recent years to prepare for the upcoming implementation of IFRS17 and K-ICS, a new local solvency regime. KBI also benefits from various implicit support, such as shared distribution channels and group-wide marketing activities under one KB brand.
Negative rating actions could occur if there is a significant deterioration in KBI’s balance sheet strength fundamentals or if support from KB Group is reduced to a degree that no longer supports the current level of enhancement.
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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