OREANDA-NEWS. Fitch Ratings has affirmed South Korea-based Kyobo Life Insurance Co. Ltd's (Kyobo Life) Insurer Financial Strength Rating (IFS Rating) at 'A+'. The Outlook is Stable.

KEY RATING DRIVERS

The rating reflects Kyobo Life's consistently sound financial fundamentals with strong market franchise, consistent profitability, and low financial leverage relative to its rating category. It also takes into consideration the challenges the company faces in developing new drivers of growth because the South Korean life insurance market is mature and intensely competitive.

The Stable Outlook reflects Fitch's expectation that Kyobo Life will maintain its healthy financial performance, given the company's strong emphasis on bottom-line profitability.

Kyobo Life is the third-largest life insurance company in South Korea, with a market share of around 11% based on premium income for 2013. Its pre-tax return on assets amounted to 1.0% for 3Q14 on an annualised basis (2013: 0.9%). This is in line with Fitch's median guideline of 0.9% for an 'A' rated insurer. The company's regulatory risk-based capitalisation (RBC) ratio was 321% at end-September 2014, in excess of the regulatory minimum of 100%. The agency expects the company to maintain a sound capital buffer commensurate with its business growth and credit profile.

Fitch views Kyobo Life's financial leverage on a consolidated level of below 10% for 2013 and 3Q14 as favourable for its current 'A' rating category. Kyobo Life does not issue any financial debt. Its debt is mainly undertaken by its subsidiaries and affiliates, and is made up of mainly bank loans and borrowings. Any significant increase in leverage could impede Kyobo Life's financial and operational flexibility at a consolidated level. However, Fitch does not expect such an increase.

RATING SENSITIVITIES

An upgrade of Kyobo Life's ratings in the near term is unlikely. However, over the longer run, the key rating triggers for an upgrade include strengthening of the company's market franchise and positioning with further international diversification, sustaining its regulatory RBC ratio at above 350%, continued proactive management of its negative spread burden, and consistently strong profitability with pre-tax return on assets above 1.3%.

Conversely, key rating triggers for a downgrade include a weakening business franchise, deterioration in capitalisation with RBC ratio falling to below 250% on a prolonged basis, and sharp decline in its financial performance, with, for example, pre-tax return on assets consistently below 0.7%.