S&P upgrades Korean Re to ‘A’/stable

HONG KONG (Standard & Poor’s) Oct. 24, 2014-Standard & Poor’s Ratings Services said today that it has raised its financial strength and counterparty credit ratings on Korean Re to ‘A’ from ‘A-‘, following the insurer’s issuance of subordinated capital securities. The outlook on the ratings is stable. At the same time, we raised the issue rating on the subordinated capital securities to ‘BBB+’ from ‘BBB’, which we had assigned to the proposed issuance on Sept. 30, 2014. On the same day, we had placed the ratings on Korea Re on CreditWatch with positive implications, based on our view that Korean Re could strengthen its capital and earnings to levels that are commensurate with higher ratings, depending on the details of the issuance.

The stable outlook reflects our view that Korean Re will maintain reasonable growth and profitability, supporting our capital assessment. In addition, we believe it will likely maintain its business profile at the current level. Its capitalization will remain as a key driver of our rating assessment over the next 24 months. We currently see the likelihood of an upgrade over the same period as remote, because we believe Korean Re’s capitalization will not improve notably.

On the other hand, we could lower the ratings on Korean Re if its capitalization level deteriorates to lower adequate or below, which could happen because of the following:
• Considerably higher revenue growth (high double-digit annual growth) without further strengthening of capital base or profitability; or
• Unexpectedly large losses from a catastrophic event

Source: Standard & Poor’s