AM Best Affirms Credit Ratings of DB Insurance Co., Ltd.
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a+" of DB Insurance Co., Ltd. (DBI) (South Korea). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect DBI's balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management (ERM).
DBI's balance sheet strength is underpinned by its risk-adjusted capitalisation being at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR), and is supported by stable capital growth from profit retention and unrealised gains on its large bond holdings, as well as relatively low underwriting and asset leverage. The company also has a high quality of capital and surplus, and prudent asset-liability management. AM Best considers DBI's financial flexibility as proven, supported by its track record of subordinated bonds issuances in the capital market.
DBI's operating performance assessment reflects its strong and well-diversified income streams generated by various lines of underwriting business and investment activities, underpinned by a five-year average return on equity of 10.4% (2015-2019). Despite a recent industry-wide deterioration in underwriting profitability, the company continued to outperform its peers on the back of its low expense ratio. Its robust investment results, demonstrated by a superior ongoing yield from well-diversified asset holdings, further supports the strong operating performance assessment.
DBI ranks third in South Korea's non-life insurance segment with a 16% market share in terms of direct premium written in 2019, a longstanding position that the company has maintained successfully amid fierce competition. The company's strong brand in its domestic market, wide product offerings within non-life and life insurance through its subsidiar (DB Life Insurance Co., Ltd.) and its leadership in digital innovation in South Korea's insurance industry support the favourable business profile assessment.
The ratings acknowledge DBI's appropriate ERM, supported by a well-developed risk framework and solid risk management capabilities. The company benefits from the expertise derived from the risk management council set up in 2018 for DBI and its subsidiaries for more efficient management of DBI's consolidated risks, which also supports informed risk-taking and capital allocation.
Negative rating actions could occur if the company's operating performance or risk-adjusted capitalisation deteriorate significantly. Positive rating actions could occur if the company's risk-adjusted capitalisation improves materially.
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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