OREANDA-NEWS. November 17, 2015. Fitch Ratings has affirmed South Korea-based Kyobo Life Insurance Company Limited's (Kyobo Life) Insurer Financial Strength Rating (IFS Rating) at 'A+'. The Outlook is Stable.

KEY RATING DRIVERS

The rating takes into consideration Kyobo Life's consistently sound financial performance with dominant market positioning, and favourable financial leverage relative to its rating category. It also incorporates the challenges the company faces in developing new drivers of growth given the mature and highly competitive life insurance market in South Korea.

Kyobo Life is the third-largest life insurance company in South Korea, with a market share of around 10.4% based on premium income for 1H15 (2014: 11.1%). Its pre-tax return on assets was 1.4% for 1H15 on an annualised basis (2014: 0.8%). The company also maintains a sound capital buffer commensurate with its business growth and credit profile. Kyobo Life's Prism Factor-Based Capital Model (Prism FBM) score was 'Strong' based on its 2014 financials. The company's regulatory risk-based capitalisation (RBC) ratio was 270.1% at end-June 2015, in excess of the regulatory minimum of 100%.

Fitch views Kyobo Life's financial leverage on a consolidated level of below 10% for 2014 and 1H15 as favourable for its 'A' rating category. The financial debt pertains mainly to the bank loans and borrowings undertaken by its subsidiaries and affiliates. Any significant increase in leverage could impede Kyobo Life's financial and operational flexibility at a consolidated level. However, Fitch does not think this is likely in the short to medium term.

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%.