AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Meritz Fire & Marine Insurance Co., Ltd. (Meritz) (South Korea). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Meritz’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

Meritz’s balance sheet strength is well supported by its risk-adjusted capitalisation, which is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company maintains one of the highest solvency ratios among its non-life peers and achieved capital growth as of year-end 2024, showing strong resilience against regulatory changes and interest rate movement. This is attributable to the company’s effective asset and liability management and strong internal capital generation. Meritz has good financial flexibility, as evidenced by successful issuances of hybrid/subordinated bonds and several rounds of capital injections from its parent, Meritz Financial Group Inc. (MFG) in the past.

Meritz’s operating performance is underpinned by a high return on equity of 30.5% in 2024, a relatively low combined ratio compared with its domestic peers and robust investment performance. The company’s favourable profitability in its major business line of long-term insurance continued in 2024 despite the heightened market competition. For general and auto insurance lines, the company focuses on achieving stable profits through active portfolio management. Its competitive investment returns are supported by a relatively large portion of high-yielding fixed-income assets such as real estate-related loans.

Meritz is the fifth-largest non-life insurer in South Korea in terms of gross insurance service revenue in 2024, with a gradually increasing market share over the past years. The expansion is driven mainly by the growth in long-term health insurance business, which accounts for the majority of the company’s gross insurance service revenue. While the general agency channel remains a major distribution channel, Meritz aims to expand and diversify other channels gradually for profit growth going forward.

Positive rating action could occur if Meritz demonstrates sustained improvement in its balance sheet strength fundamentals. Negative rating actions could occur if the company shows a sustained and material deterioration in its operating performance to a level that no longer supports the current strong assessment. A material deterioration in the credit profile of its parent, MFG, also may pose a negative impact on Meritz’s ratings.

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

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