AM Best notes that Samsung Fire & Marine Insurance (SFM) has a long history of strong operating performance, as evidenced by its large net income stream, which is primarily supported by robust investment profits, and its extremely stable underwriting performance with the lowest domestic combined ratio.
The significant increase in SFM's net income in 2021 was mostly attributable to better auto line profitability as a result of past rate hikes and decreased claims frequency during the COVID-19 pandemic, as well as a one-time special dividend income from linked stock holdings.
In SFM's largest business line, long-term insurance, the company's loss ratio (excluding the impact of the savings component) continued to outperform domestic competitors in 2021, despite remaining elevated due to ongoing industry-wide pressure on medical claims, which is anticipated to stabilize somewhat through various mitigating factors. As of 31 December 2021, investment profits continue to be healthy, underpinned by a substantial investment asset base of KRW78tn ($65bn).
Ratings affirmed
AM Best has affirmed SFM's A++ (Superior) Financial Strength Rating (FSR) and aa+ (Excellent) Long-Term Issuer Credit Rating (Long-Term ICR) (Superior). Stable is the outlook for these credit grades.
Financial statement
The ratings of SFM represent its strongest balance sheet strength, as determined by AM Best, in addition to its great operating performance, highly favorable company profile, and very effective enterprise risk management (ERM).
AM Best anticipates that SFM's risk-adjusted capitalisation would continue comfortably at the highest level over the medium term, as defined by Best's Capital Adequacy Ratio (BCAR), underpinned by its healthy absolute capital, which totaled KRW15.5tn ($13bn) at the end of 2021. Although SFM's capital is subject to some volatility due to changes in the market value of its affiliated stock holdings and the impact of interest rate fluctuations on the valuation of its available-for-sale bonds, its risk-adjusted capitalisation demonstrates resilience to a variety of capital market stress testing scenarios. The company's debt-free status, the lowest level of underwriting leverage and the highest regulatory solvency ratio in South Korea's non-life segment, and its conservative investment plan are also considered in its balance sheet strength evaluation.
Business description
In terms of gross premium written in 2021, SFM is the market leader in South Korea's non-life segment, with a market share of approximately 22%. It has superior brand power and highly diversified product offerings, as well as strong distribution channels supported by its large captive agent network and online channel.
As the industry's pioneer, the company maintains a commanding position in the constantly expanding online auto insurance category, thanks to its large customer base and vast store of data and expertise. As a member of the broader Samsung Group, SFM also underwrites group-related business in South Korea and abroad, which is a profitable source of income for its general insurance line due to its exceptionally favorable loss ratios.
Despite its small presence in international markets, SFM has been cautiously pursuing worldwide expansion through inorganic growth and partnerships over the past five years, which AM Best anticipates will assist the company in progressively expanding its position in international markets.
SFM's most recent endeavors include an investment in Canopius Group and their business collaboration in the US market, as well as the transformation of SFM's China subsidiary into a joint venture with Tencent Holdings in order to more effectively penetrate the online personal lines area in China.
AM Best feels that SFM's risk management capabilities are superior to those of its domestic and international peers with similar risk profiles, owing to the company's advanced risk management culture and structure.
In addition, the worldwide credit rating agency has taken the subsequent steps:
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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