Best Affirms Samsung Fire & Marine Ratings; Assigns ICR

December 1, 2005

A.M. Best Co. announced that it has affirmed the financial strength rating (FSR) of “A+” (Superior) of South Korea’s Samsung Fire & Marine Insurance Co., Ltd. and has assigned an issuer credit rating (ICR) of “aa-“. The outlook on both ratings is stable.

“The ratings reflect Samsung’s superior capitalization, unrivaled market position supported by a productive sales force and stable profitability,” said Best. “The ratings also consider Samsung’s excellent risk management and innovative product development capabilities.”

Best noted: “The Company has a leading market position in the Korean non-life industry. Samsung writes more business than the second and third largest players combined in a market where the top five companies write more than 80 percent of the premium. Its overall market share by premium was 32 percent in fiscal year 2004. Through innovative product development capabilities, the company was able to introduce its own brand product ‘Anycar’ and comprehensive insurance product ‘Super Insurance.’ To further expand its insurance business overseas, the company has successfully converted its Chinese branch status into subsidiary status in fiscal year 2004.

“Samsung has the highest solvency position among all Korean insurance companies. The local solvency ratio stood at 422 percent as of fiscal year 2004, and the Best’s Capital Adequacy Ratio was close to 300 percent. Adding further comfort is the company’s high earnings capacity with a flexible dividend policy.

“Due to economies of scale, Samsung enjoys one of the lowest expense ratios in the industry, which translates into higher profitability. Income volatility is limited due to well matched asset liability in the case of investment income and sound reinsurance in the case of underwriting income. As the high interest bearing liabilities sold in the past are decreasing, investment income will continue to increase. Underwriting income is expected to improve as well, since risk-loading in long-term products has increased in recent years.”

However, Best indicated that “the competitive motor insurance market and the continued low interest rate environment,” constitute offsetting factors. “Companies practicing direct sales of auto insurance and bancassurance sales of long-term products will take up a significant portion of the market share of the existing distribution channels,” best continued. It said, however that it “believes that the Samsung should be able to cope with this challenge. In addition, pressure on profitability will be short-lived as high growth can only be sustained by strong capital or future profit.”

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