AM Best


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


CONTACTS:


James Chan
Associate Financial Analyst
+852-2827-3424
james.chan@ambest.com

Seewon Oh
Senior Financial Analyst
+852-2827-3404
seewon.oh@ambest.com


Christopher Sharkey
Manager, Public Relations
+(1) 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

HONG KONG - NOVEMBER 13, 2014 01:42 PM (EST)
A.M. Best 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. (SFM) (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). A.M. Best also has affirmed the FSR of A- (Excellent) and the ICR of "a-" of SFM's subsidiaries, Samsung Vina Insurance Co., Ltd. (SVI) (Vietnam) and PT. Asuransi Samsung Tugu (AST) (Indonesia). The outlook for all ratings is stable.

The rating affirmations reflect SFM's superior risk-adjusted capitalization, strong operating performance and well-established business profile.

SFM's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), declined in fiscal year 2013, mainly driven by the revaluation of SFM's available-for-sale securities, yet remained at an excellent level. The company's regulatory solvency ratio has declined since fiscal year 2012 and was 381% at the end of June 2014.

SFM continued to deliver profitable and relatively stable operating results over the past five years, mainly driven by its prudent underwriting practices and economies of scale, coupled with the strong contribution from the fixed-interest income generated from the conservative investment portfolio.

Partially offsetting these rating factors are the company's exposure to volatility in its capital and surplus arising from the fluctuating value of its investment securities, unfavorable development in its auto line claims experience over the past three fiscal years, the continued low interest rate environment and intensified competition in the domestic non-life market.

While the company is well-positioned at its current ratings, negative rating actions may occur if there is a material deterioration in SFM's risk-adjusted capitalization led by significant investment revaluation losses and/or material deterioration in its operating performance.

SRE was established in 2011 with capitalization of SGD 68 million. The ratings of SRE reflect its sound capitalization, as measured by BCAR, profitable operating results and the support the company receives from SFM.

SRE's risk-adjusted capitalization weakened in 2013, primarily due to the strong increase in premium income, especially from its group businesses. SRE is expected to maintain its sound level of capitalization to support its current ratings because of its conservative growth plan.

SRE reported profitable results in 2013, its second year of operation. The highly profitable businesses sourced from SFM contributed to its overall positive operating result. In addition, SFM provides a wide range of support to SRE's operation given its strategic importance in implementing SFM's overseas expansion plan. One of SFM's long term growth targets includes the reinsurance business in the Asia-Pacific region.

Partly offsetting factors are the relatively small capital amount SRE possesses as a reinsurance start-up and the continued softening cycle amid an intense competition in the reinsurance market. Although net risk retention for a catastrophe event is considered low, SRE could face operating volatility and increased credit risk in a sizeable catastrophe event. A softening market and weaker pricing are partly offset by its business mix, which mainly consists of its affiliates' risks, indicating an ability to control pricing. Accordingly, A.M. Best will continue to closely monitor the performance of SRE's business plan.

SRE is well-positioned at the current ratings. Negative rating actions could occur if SRE experiences a significant deterioration in its capitalization led by a material catastrophe loss or a more aggressive growth than SRE's plan stated.

SVI's ratings reflect its strong risk-adjusted capitalization, consistently profitable operating results and its conservative reinsurance arrangement. The ratings also consider the support SVI receives from SFM, which maintains 75% ownership of SVI. Although SVI's risk-adjusted capitalization weakened in 2013 primarily due to the increase in credit risk, SVI is expected to benefit from its consistently profitable operating results and to maintain its robust level of capitalization. SVI continued to report improvement in underwriting profitability due to its major marine and cargo line, which is mainly generated from the Samsung Group companies in Vietnam. An offsetting rating factor is the intensifying competition in Vietnam's non-life insurance market. Moreover, SVI is expected to report a substantial increase in operating expenses in the next three years, partially due to rapid expansion in the insurance business and the investment into the information technology infrastructure. The relatively high level of inflation and rising labor costs are expected to exert pressure on the company's cost structure in the mid-term.

SVI's ratings are well-positioned at the current level. Downward rating actions could occur if there is a material deterioration in SVI's risk-adjusted capitalization, driven by worse than expected profitability.

AST's ratings reflect its robust risk-adjusted capitalization, profitable operating performance and sound reinsurance arrangement. The ratings also consider the support AST receives from SFM.

Although AST's risk-adjusted capitalization has weakened in 2013, primarily due to the increase in underwriting risk, the company is expected to maintain a sound level of capitalization to support the current ratings in view of its conservative growth plan.

Leveraging the strong relationship with its shareholders, SFM and PT. Tugu Pratama Indonesia (TPI) (Indonesia), AST plans to grow its engineering line by targeting key industries and reducing inward businesses to control profitability. AST reported strong profitability over the past five years owing to its strong investment results and profitable underwriting results. The sharp deterioration in combined ratio in 2013, driven by a one-off loss from the failure of one of its reinsurers in 2013, was fully offset by its strong investment income. In the wake of large losses in 2013, AST tightened its reinsurance program by selectively choosing the reinsurance panel in order to control credit risk.

Partly offsetting factors include AST's historically volatile investment results and competitive market conditions in Indonesia. Although the company narrows the target markets to group-related risks, those risks are highly linked to the economic conditions of Indonesia as AST focuses on underwriting risks from infrastructure, public transportation, oil and gas and chemical and power plant industries. The company's conservative investment strategy led to a substantial profit in 2013. Notwithstanding, a sharp swing in foreign currency rates will lead to a negative impact on the company's profitability.

AST's ratings are well-positioned at the current level. Downward rating pressures may be triggered by a substantial deterioration in the company's risk-adjusted capitalization, led by material operating losses.

The methodology used in determining these interactive ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:


  • Understanding Universal BCAR

  • Understanding BCAR for Property/Casualty Insurers

  • Catastrophe Analysis in A.M. Best Ratings

  • Rating Members of Insurance Groups

  • Risk Management and the Rating Process for Insurance Companies

  • Rating New Company Formations

  • Evaluating Country Risk


Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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