AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of KB Insurance Co., Ltd. (KBI) (South Korea). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect KBI’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect the support that the company receives from its parent, KB Financial Group Inc. (KB Group) and its strategic importance to KB Group.

KBI’s risk-adjusted capitalisation is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus increased significantly in 2023, largely due to the market-based valuation of insurance liabilities amid an elevated interest rate environment under IFRS 17, while its balance sheet fundamentals remained largely unchanged. After maintaining a no-dividend policy since 2019, under KB Group’s support to reinforce its capital in preparation for the new regulatory regime (i.e., K-ICS), the company resumed dividend payments in 2023, to support group-wide capital management and shareholder return policy due to sufficient capital buffers. Other balance sheet strength considerations include KBI’s low debt leverage and healthy coverage ratios, as well as its conservative investment strategy with a focus on asset liability management.

AM Best assesses KBI’s operating performance as adequate, with its return-on-equity and combined ratios being largely in line with its domestic industry average. The release of the contractual service margin (CSM) from long-term insurance has contributed to an increase in the company’s underwriting profitability, albeit it was partially offset by onerous contract provisions for medical indemnity claims in 2023. Prospectively, AM Best expects KBI’s long-term line profitability will continue to be supported by its sizeable CSM balance, while the auto and general lines remain relatively stable. Interest income remains a major source of investment profits, while its volatility to market conditions is viewed to be at a manageable level.

As a wholly owned subsidiary of KB Group, one of the largest financial holding companies in South Korea, KBI remains the fourth-largest non-life insurer in the country with a stable market share of approximately 13%. This is based on gross insurance service revenue in 2023.

Strategically, KBI is important to KB Group in terms of business diversification given that it is the only non-life insurer within the group. Since its affiliation into KB Group in 2015, KBI has a track record of receiving explicit support including direct capital support and a no-dividend policy between 2019 and 2022 to strengthen its capitalisation. Implicit support includes shared distribution channels and group-wide marketing activities under one KB Group brand in both domestic and overseas markets.

Negative rating actions could occur if there is a significant deterioration in KBI’s balance sheet strength fundamentals or if support from KB Group is reduced to a degree that no longer supports the current level of enhancement. Positive rating actions could occur if KBI’s operating performance demonstrates strong and consistent results to positively distinguish itself from industry peers.

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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