| OLDWICK, NEW JERSEY, U.S.A, Sept. 25,
2002-A.M. Best Co. has affirmed the financial strength rating
of A- (Excellent) of Dongbu Insurance Co. Ltd., Korea,
and assigned it a stable outlook.
The rating reflects the company’s stable market position,
consistently strong financial performance and gradual improvement
in capitalization.
Dongbu Insurance has a market share of 14% (in terms of
gross premium written) of Korea’s non-life insurance sector.
It is currently the third-largest company in the country,
trailing Samsung Fire & Marine and Hyundai Marine &
Fire Insurance. Since the Asian Crisis, the company has
been able to steadily expand its market presence as a result
of policyholders’ flight to quality.
The company has achieved consistent growth in its net profits
with the exception of fiscal year 2000 when the equity market
adversely affected its investment income. A prudent investment
strategy has been adopted; the company employs a liability
matched investment strategy and invests mainly in assets
with similar or matched maturity.
Dongbu Insurance’s financial position has remained solid,
as measured by the Best’s Capital Adequacy Ratio (BCAR).
The Korean statutory solvency ratio, which currently stands
at 188%, also reflects the company’s strong solvency position.
Going forward, positive developments in the insurance business
are expected to strengthen its capital and surplus further.
Offsetting factors include the low interest rate environment
and the liberalization of the insurance market.
In light of today’s low interest rate environment, Dongbu
faces significant margin pressures in its long-term savings
products. To cope with this problem, the company is shifting
its business portfolio towards variable interest products
as well as protection type products with fewer savings features.
Following insurance industry liberalization, new entrants
such as mono-line insurers with strong capitalization and
differentiated distribution channels would pose threats
to some existing insurers in the market, whereby strong
emphasis would be more on market share rather than profitability.
In A.M. Best’s opinion, Dongbu Insurance is well positioned
to take on such foreseeable challenges.
A.M. Best Co., established in 1899, is the world's oldest
and most authoritative insurance rating and information
source. For more information, visit A.M. Best's Web site
at www.ambest.com.
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