News Non-Life23 Sep 2022

South Korea:Biggest non-life insurer's underwriting performance is extremely stable

| 23 Sep 2022

Samsung Fire & Marine Insurance (SFM) has a long-term track record of strong operating performance, underpinned by its large net income stream that is mainly supported by robust investment profits, and extremely stable underwriting performance with the lowest combined ratio among its domestic peers, says AM Best.

SFM's net income increased materially in 2021, mainly driven by improved auto line profitability as a result of prior rate hikes and reduced claims frequency amid the COVID-19 pandemic, as well as a one-off special dividend income from the affiliated stock holdings.

In SFM’s largest business line of long-term insurance, its loss ratio (excluding the impact of the savings component) continued to outperform domestic peers in 2021, although it remained elevated due to ongoing industry-wide pressure on medical claims, which is expected to somewhat stabilise through various mitigative measures. Investment profits continue to be robust supported by substantial investment asset base of KRW78tn ($65bn) as of 31 December 2021.

Ratings affirmed

AM Best has affirmed SFM's Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa+” (Superior). The outlook of these credit ratings is 'Stable'.

Balance sheet

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).

AM Best expects SFM’s risk-adjusted capitalisation 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 that totalled KRW15.5tn ($13bn) at year-end 2021. Although SFM’s capital is subject to some volatility stemming from market value change of affiliated stocks holdings and interest rate movement impact on the valuation of available-for-sale bonds, its risk-adjusted capitalisation demonstrates resilience to various capital market stress testing scenarios. The company’s balance sheet strength assessment also factors in its debt-free position, the lowest level of underwriting leverage and highest regulatory solvency ratio in South Korea’s non-life segment, and conservative investment strategy.

Business profile

SFM is the leader in South Korea’s non-life segment with approximately a 22% market share in terms of gross premium written in 2021, and has superior brand power and highly diversified product offerings, as well as strong distribution channels underpinned by its large captive agent network and online channel.

The company maintains especially strong leadership in the rapidly growing online auto insurance segment with a high-quality customer base and an immense amount of data and knowledge it has accumulated as the pioneer in this area. As a member of the wider Samsung Group, SFM also underwrites group-related business in South Korea and overseas, which serves as a good source of profit in its general insurance line with very favourable loss ratios.

Notwithstanding its limited footprint in overseas markets, SFM has been cautiously pursuing global expansion through inorganic growth and partnerships over the past five years, which AM Best expects will help the company gradually increase its presence outside the home market.

SFM’s most recent ventures include an investment in Canopius Group and their business partnership in the US market, as well as a change of SFM’s China subsidiary into a joint venture with Tencent Holdings to tap into online personal lines segment in China more effectively.

AM Best believes that SFM’s risk management capabilities are superior to those of its domestic and international peers with similar risk profiles, with sophisticated risk management culture and framework that are embedded throughout its organisation.

In addition, the global credit rating agency has also carried out the following actions:

Company

Location

Rating

action

FSR

Long-Term

ICR

Asuransi Samsung Tugu - 70% subsidiary

Indonesia

Affirmed

A-

(Excellent)

a-” (Excellent)

Samsung Reinsurance - 100% subsidiary

Singapore

Upgraded

to A++ (Superior) from A (Excellent)

to “aa+” (Superior) from “a” (Excellent)

Samsung Vina Insurance - 75% subsidiary

Vietnam

Upgraded

to A++ (Superior) from A- (Excellent)

to “aa+” (Superior) from “a-” (Excellent)

Samsung Fire & Marine Insurance Company of Europe - 100% subsidiary

UK

Upgraded

to A++ (Superior) from A (Excellent)

to “aa+” (Superior) from “a+” (Excellent)

Source: AM Best

The outlook of these credit ratings is 'Stable'.

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