Chairman Choi Young-mook of the Construction Guarantee Cooperative (CG).

Chairman Choi Young-mook of the Construction Guarantee ‘Cooperative (CG) said CG provided support to member firms worth 688.5 billion won thru cuts in various fees, easing advance payment joint management, and enforcing the bidding guarantees for sales of land system improvement as a result of CG’s strenuous efforts to help the growth of SME construction firms during the slump in the construction market.

CG’s support to those SME construction firms should be focused on long-term growth. CG cut the fees this year, too, following last year’s cuts in guarantee fees and discounts for employees who donated internal organs, 5 percent in fees for contracts, and an advance payments guarantee that many SME construction firms with credit ratings of BB.B use.

If member firms of above CC class with construction capacity ratings below 300 make requests, the industrial support special discount of 10 percent will be applied.

The discount in fees amounted to a savings of 30.9 billion won during the first half of this year and totals 37.5 billion won by the year-end. From May, the joint custody of advanced payments has been eased with the exemption base for the member firms for joint management of advance payments eased from AA class to A class.

For members with credit rating of B and above, the advance payments joint custody will be raised to less than 1 billion won from less than 700 million won to make possible for member firms to borrow funds in cash. CG, in fact, will be providing 26.3 billion won in additional liquidity to the entitled member firms. CG also signed contact with the Korea Land and Housing Corp. to issue the bidding guarantees for sales of land.

When bidding for land for joint residences, the bidders submit the bidding guarantees issued by CG instead of bidding guarantees they are subject to submit.

Fitch Ratings has affirmed South Korea-based Construction Guarantee’s (CG) Insurer Financial Strength (IFS) rating at ‘A’(Strong). The Outlook is Stable. KEY RATING DRIVERS CG’s rating reflects Fitch's view that the insurer continues to enjoy strong state support as well as the company’s financially sound fundamentals, including its well-established market franchise in its niche market and very strong capital backing its business profile.

The rating also considers CG’s high business concentration risk in the domestic construction sector, which is closely correlated with the economy.

The agency believes CG’s strong state support, as evident from the company's key role in the construction industry and heavy state involvement in its operations, is unlikely to change in the short to medium term.

CG is a cooperative established in 1963 to promote construction industry growth and development by offering financing and guarantee insurance services to members.

The company is governed and regulated by the Ministry of Land, Infrastructure and Transport and must obtain relevant approval per the Framework Act on the Construction Industry for operational activities.

CG's return on average equity (ROAE) amounted to 3% in 2016 (2015: 2%) as a result of lower claim payments arising from enhanced claims monitoring and risk management, and remained at 3% on an annualized basis for 1H17.

The net guarantee loss rate - total net guarantee claims paid after recovery/total amount of guarantee underwritten - fell to 0.21% in 2016 from 0.24% in 2015. CG underwrites more than 95% of its business from the South Korean market.

A view of the building in Gangnam District in Seoul, occupied by the Construction Guarantee Cooperative(CG). (Photos: CG)