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TMCNet:  AM Best Affirms Credit Ratings of Meritz Fire & Marine Insurance Co., Ltd.

[December 06, 2018]

AM Best Affirms Credit Ratings of Meritz Fire & Marine Insurance Co., Ltd.

AM 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 AM 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 risk-adjusted capitalization being at the strong level, as measured by Best's Capital Adequacy Ratio (BCAR). The strong balance sheet assessment also reflects a healthy growth trend of capital and surplus backed by a solid stream of net profit, positive financial flexibility and well-managed asset-liability mismatching to support the long-term insurance line, which is the company's core business.

Meritz's capital requirements, as measured by BCAR, continue to be driven by asset risk due to the sizeable investment assets relative to its available capital. While a large portion of investment assets is in real estate-related loans with exposure to real estate market conditions and the business cycle of construction industry, this risk has been managed effectively as proven by the low delinquency ratio and non-performing loan ratio.

Meritz's operating income has been highly profitable with an improving trend over the past five years, due to a decreasing loss ratio and strong investment performance. However, a high expense level, which includes additional amortization of acquisition costs arising from fast growing new business, has placed pressure on net income and is expected to remain under the current accounting regime until the implementation o IFRS 17.

Meritz is the fifth-largest player in Korea's non-life insurance market in terms of direct premium written. With an assertive expansion strategy, especially through general agency channel, the company has gradually increased its market share. Meritz has higher concentration in long-term insurance lines compared with its domestic peers, particularly in health insurance, which has high profit margin and short-tail risks.

Negative rating actions could occur if there is a significant decline in the company's risk-adjusted capitalization. Positive rating actions could occur if Meritz demonstrates sustained improvement in its profitability while maintaining strong risk-adjusted capitalization.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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