Market Overview

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


A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) and 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 ICR of “a” of SFM's wholly owned subsidiary, Samsung Reinsurance Pte. Ltd. (SRE) (Singapore). The outlook for all ratings is stable.

The ratings reflect SFM's strong risk- based capitalization, sound operating performance and its superior risk management. SFM continued to maintain its superior capitalization over the past five years, owing to its high profitability. The company's regulatory solvency margin remained at 440% at the end of September 2012, which is the highest amongst large insurance companies in South Korea.

SFM's profitability remains strong with a limited volatility as its operating ratio (combined ratio minus investment income ratio) ranged from 90% to 92% in the past five years, owing to its tight management in underwriting as well as investments. Although tight control of profitability and capitalization has led SFM to lose its market share in the past five years, recent favorable developments in alternative channels (such as the internet and general agency) are expected to help it to further penetrate the domestic market. In addition, SFM's expansion into overseas markets is on course of development as evidenced by its successful establishment of subsidiaries in major markets. The company has strengthened its risk management, particularly its natural catastrophe risk management over the past year. Although SFM's incurred loss from the Thailand floods in 2011 was limited to the impact on its overall operating performance, the company has tightened underwriting guidelines and enhanced reinsurance coverages.

Partially offsetting these positive ratings factors is the fierce competition in the insurance market, the persistently low interest rate environment and the potential volatility in SFM's risk-adjusted capitalization due to its investment in its affiliated companies, including Samsung Electronics.

A downgrading of SFM's ratings could arise if there is a material deterioration in its risk-adjusted capitalization and weakening of its operating performance.

SRE was established in 2011 in order to play a key role in SFM's expansion into overseas markets. The company is capitalized at SGD 86 million. The ratings of SRE reflect its solid risk-based capitalization, expected favorable operating results given the profitable businesses transferred by SFM, its low implementation risks due to its experienced management team and the wide range of support it receives from SFM.

SRE is expected to maintain its robust capitalization, which will support its ratings, mainly due to the strong contribution it anticipates receiving from net profits in the next five years. SRE is expected to maintain profitable results as SFM selectively transfers its highly profitable accounts to SRE. The transferred businesses are expected to account for more than 80% of SRE's total business. In addition, SRE's experienced management team and the full range of operating support from SFM (i.e., underwriting and claims guidelines, IT system management and risk management) should reduce its implementation risks as a start-up company.

A.M. Best acknowledges that SRE's capital is relatively small for a reinsurance start-up. Although the net risk retention for a catastrophe event is considered to be low, the company could face increases in both operating volatility and credit risk in case of a catastrophe event. Accordingly, A.M. Best will closely monitor the performances of SRE against its stated business plan.

Negative ratings actions could occur if SRE should experience a significant deterioration in terms of management, earnings, capitalization or risk profile.

The methodology used in determining these 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. Key criteria utilized include: “Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; “Evaluating Country Risk”; “Rating Members of Insurance Groups”; “Risk Management and the Rating Process for Insurance Companies.”; and “Rating New Company Formations.” Best's Credit Rating Methodology can be found at

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best
Seewon Oh, +852-2827-3404
Senior Financial Analyst
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
Senior Manager, Public Relations
Moungmo Lee, +852-2827-3402
General Manager
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations

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