| OLDWICK, NEW JERSEY, U.S.A., XXX
,X, 2003-A.M. Best Co. has affirmed the financial strength
rating of A- (Excellent) of Dongbu Insurance Company Ltd
(South Korea).
The rating reflects the company’s consistent operating performance,
solid market position and gradual improvement in risk-based
capitalization.
Dongbu Insurance has achieved consistent improvement in
its underwriting performance. The company’s underwriting
results increased to KRW 24 billion (USD 19 million) in
fiscal year 2002 from KRW -156 billion (USD-141 million)
in fiscal year 1999.
Dongbu Insurance has consistently achieved one of the lowest
expense ratios in the Korean non-life industry. Driven by
its prudent investment strategy over the past five years,
the company has steadily generated net income with limited
volatility.
Despite the intense competition in the motor market, Dongbu
Insurance has been able to maintain its overall market share
by strengthening its position in the commercial lines sector.
Dongbu Insurance has maintained a solid financial position,
as measured by the Best’s Capital Adequacy Ratio (BCAR).
The Korean solvency ratio, which currently stands at 179%,
also reflects the company’s adequate solvency position.
Consistent financial performance coupled with slow down
of business growth will further reinforce risk based capital
and surplus.
Offsetting these positive rating factors are the low interest
rate environment, increasing popularity of direct channel
and bancassurance and the company’s relatively high strategic
investments, including those in Anam Semiconductor, Hana
Bank and Dongbu Life. These strategic investments may impose
some volatility on the company’s capital.
The low interest-rate environment exerts significant pressure
on Dongbu Insurance’s margin, particularly in its long-term
savings products. To enhance its margin, the company is
re-aligning its business focus towards variable interest
products as well as protection type products with fewer
savings features.
Dongbu Insurance is expected to be challenged by companies
utilizing bancassurance and direct channels as their distribution
strategies. An increase in market penetration by other market
participants through direct channel will lead to greater
competition in the industry. Also, with the further development
of bancassurance, the competition in long-term savings products,
including annuities, will be intense.
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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