Fitch Ratings has affirmed South Korea-based TONG YANG Life Insurance Co., Ltd.'s (TYL) Insurer Financial Strength Rating at 'BBB+' (Good).

The Outlook is Stable.

KEY RATING DRIVERS

The rating reflects TYL's 'Good' business profile as a mid-sized life insurer in South Korea, its 'Strong' capitalisation and 'Good' financial performance. On the other hand, the insurer faces the challenge of expanding in South Korea's mature and competitive market to maintain profitability amid a lingering low interest-rate environment.

The revision in the Outlook to Stable from Evolving reflects Fitch's view that TYL's credit profile is not directly affected by that of its parent, Dajia Insurance Group (DIG), which has a collective 75% stake in the insurer. DIG - which is 98% owned by state-controlled China Insurance Security Fund Co Ltd - took over all of Anbang Insurance Group's previous stake in TYL in 2019. The regulatory and governance framework under which TYL operates ringfences its capitalisation and protects policyholders by restricting the minimum capital position and board supervision. The regulation requires the board of directors to comprise a majority of external directors.

Nonetheless, there remains some uncertainty over TYL's strategic ownership in the short- to medium-term if DIG intends to sell its stake in TYL, although no formal timeframe is available. Fitch will evaluate the impact on TYL's credit profile if there is an eventual change in ownership.

Fitch assesses TYL's business profile as 'Moderate' compared with all other Korean life insurance companies due to its 'Moderate' business-risk profile and 'Moderate' operating scale. We therefore score TYL's business profile at 'bbb+' under our credit factor scoring guidelines.

TYL is South Korea's sixth-largest life insurer, with a market share of around 5% by premium income at end-September 2019. It continues to optimise its product mix by focusing on the sale of more profitable protection-type policies and has multiple distribution channels. Protection policies constituted about 40% of sales in 2019, based on total premium income, up from 24% in 2016. TYL also has limited business and investment impact from the outbreak of COVID-19, as its policies do not cover the virus and it has a generally conservative investment profile.

Fitch regards TYL's capital as 'Strong'. The company's regulatory risk-based capital ratio improved to 216% in 2019, from 205% in 2018, due to a subordinated debt issuance of KRW200 billion during the year. This saw capital under Fitch's Prism Model Score marginally reach the 'Very Strong' category. TYL's financial leverage ratio amounted to about 10% after the issuance, well below the median range for its rating category.

TYL's profitability has been supported by generally favourable loading and risk margins, although its interest margin tends to be volatile depending on market conditions. Overall, its return on assets (pre-tax) amounted to 0.5% and averaged about 0.6% over the past three years.

RATING SENSITIVITIES

Upgrade sensitivities include:

improvement in financial fundamentals, such as return on assets (pre-tax) persistently at 0.7% or above, and

Fitch Prism Model score well into the 'Strong' category on a sustained basis.

Downgrade sensitivities include:

significant decline in capitalisation, with TYL's risk-based capital ratio below 180% on a prolonged basis or its Fitch Prism Model score falling to the low end of the 'Adequate' category, or

sustained weakening in TYL's financial performance due to return on assets (pre-tax) falling consistently below 0.3%.

ESG CONSIDERATIONS

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity.

RATING ACTIONS

ENTITY/DEBT	RATING		PRIOR

HIDE RATING ACTIONS

TONG YANG Life Insurance Co., Ltd.

Ins Fin StrBBB+ Affirmed		BBB+

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Additional information is available on www.fitchratings.com

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