AM Best affirms Meritz's outlook as stable

Its balance sheet strength is bolstered by its solid financial flexibility.

Meritz Fire & Marine Insurance Co.'s outlook remains stable, AM Best said, thanks to its strong balance sheet and operating performance, neutral business profile, and sound enterprise risk management (ERM) practices.

Meritz's balance sheet strength is bolstered by its risk-adjusted capitalisation and solid financial flexibility, evidenced by successful issuances of hybrid and subordinated bonds as well as capital injections from its parent, Meritz Financial. Despite these activities, the company maintains modest financial leverage. 

AM Best noted that dividend payout ratios are likely to remain higher than pre-restructuring levels. However, Meritz's strong earnings stream is expected to continue supporting its risk-adjusted capitalisation in the medium term.

The company's ERM practices are deemed appropriate for managing its substantial exposure to real estate-related loans. Nonetheless, AM Best plans to monitor any significant increases in asset risk, particularly given uncertainties in the domestic and global real estate markets.

Meritz's operating performance benefits from strong investment returns and a comparatively low loss ratio amongst domestic peers. Its long-term insurance line reported the lowest combined ratio in 2023, underlining its operational efficiency.

The company also achieves stable profits in its general and auto insurance lines through active portfolio management. Investment performance is notably supported by competitive returns from real estate-related loans and an enlarged asset base, AM Best said.

AM Best anticipates that Meritz's current business mix will remain largely unchanged in the medium term. Whilst the general agency channel continues to dominate as the primary distribution channel, the company has plans to expand its tied agent channel.