A.M. Best Affirms Ratings of Construction Guarantee Cooperative

HONG KONG--(BUSINESS WIRE)-- A.M. Best has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating of “aa-” of Construction Guarantee Cooperative (CG) (South Korea). The outlook for both ratings is stable.

The ratings assigned to CG reflect its excellent risk-adjusted capitalization and strong business profile in surety bonds for general construction companies.

CG specializes in writing surety bonds for its membership of general construction companies in South Korea and has maintained a dominant market share over a long-term period. While CG is 100% owned by its members as a cooperative organization, it is currently under supervision and control of the Ministry of Land, Infrastructure and Transport, a South Korean government body, as stipulated by the Supervision Guideline for Construction-related Mutual Aid Cooperatives. CG executes government policies to support the construction industry.

CG’s risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio, remains strong to support its current ratings. A.M. Best expects CG’s significant accumulation of capital, equivalent to approximately 85% of its total assets, to withstand adverse stress scenarios including a surge in guarantee paid amount.

Offsetting rating factors are volatility in CG’s operating performance and high concentration of risk in the domestic market. Although CG has reported positive net profits since its establishment, its net profits remain volatile mainly due to the material exposure to guarantee risks as a result of its full retention policy. The claims experience has high correlation with the economic cycles in the construction sector.

A.M. Best believes that CG is well-positioned at its current rating level. Negative rating actions could occur following a material deterioration in CG’s risk-adjusted capitalization led by a significant increase in guarantee payments as a result of a sharp deterioration in the construction industry.

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

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151207006126/en/

A.M. Best Company
Seewon Oh, +852-2827-3404
Associate Director, Analytics
[email protected]
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Moungmo Lee, +65-6589-8412
Managing Director, Analytics
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Christopher Sharkey, +(1) 908 439 2200, ext. 5159
Manager, Public Relations
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Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Company

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