HONG KONG--(BUSINESS WIRE)--#insurance--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of �a-� (Excellent) of KBFG Insurance (China) Co., Ltd. (KBFG China) (China). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect KBFG China�s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also reflect the wide range of support that the company receives from its parent, KB Insurance Co., Ltd., in areas including business development, reinsurance and investment.
AM Best assesses KBFG China�s balance sheet strength at the very strong level, supported by its risk-adjusted capitalisation at the strongest level, as measured by Best�s Capital Adequacy Ratio (BCAR). The company continues to maintain a very low underwriting leverage, and a conservative investment portfolio comprising cash and bank deposits only. Due to its small capital base and the underwriting of large commercial accounts, KBFG China�s risk-adjusted capitalisation is exposed to volatility in the event of large losses. This is mitigated partially by its comprehensive reinsurance programme placed with financially sound reinsurers. The company has not paid dividends for the past five years and plans to continue retaining its profits fully to support growth over the short to medium term.
KBFG China has reported net profits over the past five years, with a low-to-mid single digit return-on-equity ratios reported during that period. The company�s claim experience on a net basis has been volatile as a result of its small net premium size. Nonetheless, its operating expense ratio has been favourable due to its low acquisition costs and favourable reinsurance commission income. Despite the volatile and marginal underwriting performance, KBFG China�s investment results have been stable due to its conservative investment portfolio, which contributed to the majority of its bottom line result. AM Best expects that the company�s investment returns will continue to be the main driver of its earnings going forward.
As a foreign-owned insurer focusing on serving Korean Interests Abroad business, KBFG China has a defensible competitive advantage in this niche market, despite accounting for a small share of the overall domestic non-life market. The company intends to maintain a stable underwriting book consisting of commercial property, construction and engineering, cargo, liability and accident, and health lines of business. AM Best views KBFG China�s ERM as appropriate for its risk profile.
While positive rating actions are unlikely over the near term, negative rating actions could occur if there is a significant decline in the company�s risk-adjusted capitalisation or absolute capital size. Negative rating actions may also arise from a sustained deteriorating trend in its operating performance, or from a reduced level of support from its parent group.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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