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AM Best Affirms Credit Ratings of Meritz Fire & Marine Insurance Co., Ltd.

AM Best has 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 outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Meritz’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

Meritz’s balance sheet strength is well-supported by its risk-adjusted capitalisation, which is assessed at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). Meritz has good financial flexibility, as evidenced by several rounds of capital injections from its parent, Meritz Financial Group Inc. (MFG), as well as successful issuances of hybrid/subordinated bonds in previous years. While there is a likelihood of increased dividends being sent upstream under the new group structure, AM Best expects that Meritz’s strong earnings stream will continue to support its risk-adjusted capitalisation over the medium term. In terms of its sizeable exposure to real estate-related loans, the company has appropriate risk management practices in place. That being said, it is necessary to monitor any potential increase in asset risk closely, especially given the uncertainty in the domestic and global real estate markets in recent periods.

Meritz’s operating performance is underpinned by consistently strong investment performance and a relatively low loss ratio compared with its domestic peers. The overall loss ratio continued a downward trend in 2022 due to the improvement in the long-term insurance line owing to an enlarged premium base and various measures taken by the company and regulators to stabilise medical claims in recent years. Despite a rebound in medical claims in 2023 during the post-pandemic phase, the overall profitability of the long-term line is expected to be supported by Meritz’s ongoing efforts to tighten underwriting and claims management and expand into high-margin policies. The company’s historically strong investment income, mainly supported by competitive returns from real estate-related loans, continued to be a major source of earnings, with a five-year average net investment return (including capital gains/losses) of 4.7% (2018-2022).

Meritz is the fifth-largest non-life insurer in South Korea, with a growing market share that reached 11.5% in 2022 in terms of gross premiums written (GPW). The company strategically focuses on long-term insurance, which represented about 85% of its 2022 GPW, while auto and general segments made up the remainder. AM Best expects that the current business mix will remain largely unchanged over the medium term. The general agency channel remains as a major distribution channel and has been the key driver of the company’s growth in prior years.

Negative rating actions could occur if there is a significant deterioration in Meritz’s risk-adjusted capitalisation, for example, due to insufficient capital growth to support its business expansion or an increase in investment asset risk or an excessive dividend policy, to a level that no longer supports the current balance sheet strength assessment. A material deterioration in the credit profile of its parent, MFG, also may have a negative impact on the company’s ratings. Positive rating action could occur if the company demonstrates sustained improvement in its balance sheet fundamentals.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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