The Tokyo office of Standard & Poor’s Ratings Services has issued a bulletin which notes that it has raised its insurer financial strength and long-term counterparty credit ratings to “BBB+” from “BBB” on Korean Reinsurance Co. (Korean Re), LG Insurance Co. Ltd., and Hyundai Marine & Fire Insurance Co. Ltd. All of the ratings are stable.
S&P noted: “The competitive dynamics of Korea’s insurance industry are changing rapidly. Reduced barriers to entry and the diversification of distribution channels has led to heightened price competition on commodity-type insurance products.”
“Despite the transitions underway, the rated insurers should continue to benefit from a flight to quality, as all three companies provide their target segments with tailored products through diversified distribution channels,” stated S&P credit analyst Young Il Choi.
S&P also indicated that “Korean Re’s solid operating performance for the past few years improved its capitalization to some extent, and its strong competitive position in domestic non-life reinsurance mitigates the volatility of its overseas business. If the company can maintain good profitability and enhance its capitalization noticeably over the next few years, the ratings could be revised upward.
“Its aggressive expansion overseas, growing at about 20 percent per year, is a medium-term risk factor for earnings, given the increasing frequency and scale of natural disasters globally.”
Commenting on the other two upgrades, S&P said: “Policyholders’ tendency to prefer stronger insurers with superior brands aids LG Insurance and Hyundai Marine & Fire in strengthening their competitive positions. The risk of negative spreads from their long-term savings products should continue to decline as insurance policies with higher interest rates are redeemed.”
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