A.M. Best Affirms Ratings of Korean Reinsurance Company

A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of Korean Reinsurance Company (Korean Re) (South Korea). The outlook for both ratings is stable.

The rating affirmations reflect Korean Re’s sound risk-adjusted capitalization, stable operating performance and well-established business profile.

Korean Re’s risk-adjusted capitalization, partially supported by the issuance of subordinated capital securities worth USD 200 million on Oct. 21, 2014, remains sound, as measured by Best’s Capital Adequacy Ratio (BCAR), and supportive of the current ratings. The company aims to utilize the additional funds in expanding its overseas portfolio and increasing its retention capacity.

With the exception of fiscal year 2011 in which the overseas portfolio was negatively impacted by the Thailand Flood, the company has established a track record of stable underwriting results. The company tightened its underwriting guidelines in tandem with the losses and has stabilized the performance in its overseas portfolio. Moreover, the personal portfolio recorded a stable trend in the combined ratio, attributed to the loss ratio-linked reinsurance commission structure, albeit the ratio remains at a relatively high level.

Leveraging the market experience attained through a long operating history as South Korea’s sole domestic reinsurer with a dominant market share there, Korean Re has utilized its ability to higher quality risks to strengthen its profitability.

Partially offsetting factors include the prolonged low interest rate environment, lower growth rate in the Korean non-life insurance market and the generally softening reinsurance climate.

Positive rating actions may occur if Korean Re can demonstrate a continued trend of capital strengthening and improving operating performance.

Negative rating pressure could occur if the company’s risk-adjusted capitalization were to significantly deteriorate due to adverse 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.

Key insurance criteria reports utilized:

• Equity Credit for Hybrid Securities
• Understanding Universal BCAR
• Catastrophe Analysis in A.M. Best Ratings
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies

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. For more information, visit www.ambest.com.

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