HONG KONG, Dec 6 (Bernama-BUSINESS WIRE) -- AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Meritz Fire & Marine Insurance Co., Ltd. (Meritz) (South Korea).
The ratings reflect Meritz’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 positive outlooks are based on improvement in the company’s underwriting performance in most recent years driven by realigned channel strategy and underwriting initiatives. The outlooks reflect AM Best’s expectation that the favourable trend in operating performance will continue, supported by the company’s strategy to achieve profitable growth, as well as robust investment income, while maintaining the strong balance sheet strength needed to support an expanding book of business.
Meritz’s operating performance is underpinned by its relatively low loss ratio compared with domestic peers and strong investment performance that helped the company consistently produce double-digit return on equity in each of the past five years with an average of 15.5% (2016-2020). Its rapidly rising expense ratio in the previous years, which was driven by strong new business growth through the general agency channel, has stabilised and improved notably since the beginning of 2020 as the company realigned its channel strategy with a heavier focus on profitability. Although its risk-loss ratio for the long-term insurance line (a loss ratio metric excluding loading and savings premiums) remains elevated amid rising medical consumption, AM Best expects it will be mitigated partially over the coming years by various underwriting initiatives, including rate adjustments for medical indemnity coverage, and tightened underwriting, as well as improving persistency ratios. Its auto loss ratio, which remained the lowest among peers since 2017, further improved in 2020 and the first nine months of 2021 due to cumulative rate hikes and reduced claims amid the COVID-19 pandemic.
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