HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Meritz Fire & Marine Insurance Co., Ltd. (Meritz) (South Korea). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Meritz’s balance sheet strength, which A.M. Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Meritz’s strong balance sheet is underpinned by its very strong risk-adjusted capitalization, high degree of liquidity and highly rated reinsurance panel. Meritz’s capital requirements, as measured by Best’s Capital Adequacy Ratio (BCAR), continue to be driven by asset risk due to its sizeable investment assets relative to its shareholder funds. While the company has significant exposure to loans – project financing loans in particular – its investment portfolio is considered to be well-managed in terms of asset/liability matching and diversified in terms of asset class.
Meritz’s profitability has recovered since 2014, demonstrated by improvements in its return on equity and operating ratio. In the first nine months of 2017, the company further boosted profitability and reported an operating ratio below 90%, owing to improved underwriting results and strong investment returns.
Although Meritz is not a market leader in South Korea, the company is viewed as competitive in its chosen markets such as the general agency channel. With some concentration of long-term insurance in its business mix, the company carries moderate product risk.
Positive rating actions could occur if Meritz demonstrates sustained improvement in its profitability while maintaining very strong risk-adjusted capitalization.
Negative rating actions could occur if Meritz's risk-adjusted capitalization declines significantly, or if there is material deterioration in its operating performance.
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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