S&P Revises Outlook on Samsung to Positive

January 31, 2002

Standard & Poor’s announced that it has revised the outlook on its single-‘A’ long-term local currency credit rating on South Korea’s Samsung Fire & Marine Insurance Co. Ltd. to positive from stable, and has affirmed its single-‘A’ insurer financial strength and local currency counterparty credit ratings.

“The outlook revision reflects Samsung Fire’s leading position in the Korean nonlife insurance market and very strong capitalization. The company has recorded strong double-digit business growth supported by a flight to quality by Korean consumers, amid ongoing deregulation of the nonlife market, said S&P’s announcement.

It noted, however that it considered the expected impact of price liberalization on Samsung Fire’s profitability and its long-term savings lines, which still have high loss ratios and increasing interest rate risk amid falling interest rates as”moderating factors.”

Two leading factors noted by S&P were Samsung’s well-recognized brand name and its leading market position with” 30.3% in direct premiums written in the first-half of fiscal 2001 (ended September 2001), up from 29.2% at the end of fiscal 2000.” The gain was mainly attributable by the “prolonged flight to quality and scale among domestic consumers,” said S&P.

S&P’s analysis also cited Samsung’s growth in direct premiums written of 20.5% in the first half of fiscal 2001 and 22.8% in fiscal 2000 and its sound operating performance as reasons to improve its outlook.

Samsung has handled domestic market pressure well, said S&P, despite a slight earnings deterioration in fiscal 2000 of 3.1% pretax due to pressure on its investment income from falling interest rates and a weak domestic equity market, “pretax ROR recovered to 8.3% in the first half of fiscal 2001, supported by an improved combined ratio at 99.3%, which compares well with the industry average of 104.5%.”

“Samsung Fire is expected to maintain its excellent market position, supported by the prolonged flight to quality of Korean consumers, amid intensifying market competition and ongoing deregulation. The impact of deregulation of the domestic primary market on the company’s operating performance is a risk factor that will be carefully monitored over the short term,” S&P’s announcement concluded.

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