2013-10-11 16:46:04 -
A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of A (Excellent)and the issuer credit rating of “a” of Dongbu Insurance Company, Ltd. (Dongbu) (South Korea). The outlook for the FSR is stable, while the outlook for the ICR is positive.
The rating actions for Dongbu reflect its robust risk-adjusted capitalization, long-term track record of strong operating performance and its sophisticated enterprise risk management controls. Dongbu’s risk-adjusted capitalization, as measured by Best Capital Adequacy Ratio (BCAR), has improved in fiscal year 2012 and its level remains supportive of its current ratings. The company’s capital and surplus growth has accelerated from 16% in 2012 to 25% [KRW: 2,756 billion] at the end of March 2013. Dongbu’s regulatory risk-based capital (RBC) ratio
remained strong at 231.4% at the end of June 2013, the second-highest level in the primary non-life insurance industry.
However, the level did decrease in the past year primarily due to the tightened rule on RBC regulations. The regulations are expected to continue to strengthen in the mid term, with Dongbu anticipated to maintain an adequate level of regulatory solvency margins owing to its strong profitability. Dongbu’s historical operating performance has been strong with limited volatility due to its high operating efficiency and its active investment management, which earns a relatively high level of investment returns. With increasing risk in investment management in the face of uncertain financial market conditions, Dongbu has enhanced its investment risk management capabilities in order to control risk exposure in both domestic and overseas markets. In addition, the company set up a separate reinsurance program for overseas businesses, which has grown significantly in the past five years.
Offsetting these positive rating factors are Dongbu’s vulnerability to adverse financial market movements such as a sharp increase in interest rates and a decreased interest margin. Although the company has secured a positive interest margin in the past three years, (with its efforts to capture high returns from its active investment strategy and reduce credit rates on long-term insurance products) the amount of its interest margin has declined year over year.
Downward rating pressure could arise if there is a significant decrease in Dongbu’s risk-adjusted capitalization and a material deterioration in its operating performance.
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 : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
A.M. Best Asia-Pacific Limited 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. For more information, visit www.ambest.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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