AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of a- of LIG Insurance (China) Co Ltd (LIG China) (China). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect LIG Chinas balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect the wide range of support the company receives from its parent, KB Insurance Co., Ltd. (KB Insurance) in areas including business development, reinsurance and investment.
LIG Chinas risk-adjusted capitalization remains at the strongest level, as measured by Bests Capital Adequacy Ratio (BCAR), supported by very low underwriting leverage and a highly conservative investment portfolio. The company has generated positive net profits consistently in the past five years, mainly attributable to a solid stream of interest income and low acquisition costs from its direct distribution channel. Despite having a small market share, LIG China occupies a niche market by focusing on servicing Korean Interests Abroad (KIA) that operate in China, which generate more than 90% of the companys revenue.
An offsetting rating factor is LIG Chinas underwriting of large commercial accounts with potentially large losses, leading to volatility in its underwriting performance. This is mitigated by a comprehensive reinsurance program that lowers the companys net retention in these risks. However, the high reinsurance dependence also exposes the company to reinsurer credit risk in the event of major losses. As a foreign-owned insurer concentrated on KIA businesses, LIG China is vulnerable to regulatory and political uncertainties in its operating environment.
While positive rating actions are unlikely in the near term, negative rating actions could occur if there is a substantial decline in the companys risk-adjusted capitalization, a significant deterioration in its operating performance, or reduced support from the parent.
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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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