Standard & Poor’s Ratings Services today raised its insurer financial strength and counterparty credit ratings on LG Insurance Co. Ltd. to ‘BBB’ from ‘BBB-‘ with a stable outlook, “based on the insurer’s recovering capitalization and improved risk management of its investment portfolio.”
S&P noted that LG stands to benefit from “a consumer trend favoring large insurers.” It reported “double-digit growth of 10.7% in direct premiums written in the first half of fiscal 2002, following on from the previous year’s 13.8%,” stated S&P credit analyst Tatsuo Kurogi. The company’s capitalization has recovered substantially after suffering heavy investment losses in fiscal 2000.
S&P noted that “despite the recent decline of domestic stock prices in the first half of fiscal 2002, the negative impact on its capitalization was substantially offset by increased underwriting profits. However, any further improvement will be constrained to some extent by the company’s strong business growth and intensifying competition.”
“The company has been executing a redeveloped prudent investment and risk management strategy under the direction of new management. As a result, close to 80% of total invested assets comprised fixed-income assets as of September 2002. LG Insurance has also closely monitored interest rate risk in its long-term savings lines, which is increasing amid falling interest rates, through its redeveloped asset liability management,” the report continued.
“Net income has continued to rebound,” said S&P “to Korean won 42.9 billion [$354 million] for the first half of fiscal 2002 from net losses of 141 billion won [$1.13 billion] in fiscal 2000, reflecting a recovery in investment income and improved underwriting profitability.”
“However, LG Insurance’s profitability is still subject to the investment environment and is also not immune from the impact of ongoing deregulation in the local insurance market,” Kurogi warned.
Was this article valuable?
Here are more articles you may enjoy.