FEBRUARY 10, 2020 09:03 AM (EST)

AM Best Places Credit Ratings of Hanwha General Insurance Company Limited Under Review With Negative Implications


CONTACTS:
 Chanyoung Lee
Senior Financial Analyst
+852 2827 3404
chanyoung.lee@ambest.com

Christie Lee
Senior Director, Analytics
+852 2827 3413
christie.lee@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

HONG KONG - FEBRUARY 10, 2020 09:03 AM (EST)
AM Best has placed under review with negative implications the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Hanwha General Insurance Company Limited (HGI) (South Korea).

The under review status follows HGI’s public disclosure on Jan. 31, 2020, of a consolidated net loss of KRW 69 billion (USD 59 million) for its preliminary fiscal-year 2019 results.

HGI has maintained consistent profitability since 2014, although a deterioration in results was observed from 2018. As per its disclosure, the company is expected to record a net loss of KRW 69 billion (USD 59 million) on a consolidated basis for fiscal-year 2019.This marks a decrease of KRW 151 billion (USD 129 million) compared with fiscal-year 2018, during which HGI posted net profits of KRW 82 billion (USD 70 million).

The deterioration in HGI’s underwriting performance since 2018 was due mainly to inadequate pricing, which consequently led to the company’s inability to catch up with increasing loss costs and expenses in its auto and long-term insurance business lines. While its bottom line had been supported by a stable stream of investment income, which helped mitigate underwriting volatility, the company also is expected to report sizeable impairment losses of KRW 25 billion (USD 21 million) from its securities holdings for 2019, which has placed further pressure on its bottom line. HGI is seeking ways to improve its underwriting profitability, including rate increases for its auto and medical indemnity insurance lines, product restructuring and tighter underwriting.

The company’s risk-adjusted capitalization is under pressure from stagnant capital growth, especially from its recent net profit miss, as well as increasing required capital from strong top-line growth. AM Best will continue to hold discussions with HGI’s management team on its capital and business plans to assess the company’s medium-term balance sheet strength in order to resolve the under review with negative implications status.

Negative Credit Rating (rating) actions could occur if the company’s projected risk-adjusted capitalization over the medium term decreases to a level that no longer supports the current balance sheet assessment, or if the company’s interest coverage remains insufficient to meet its interest commitments. Negative rating actions also could occur if the company’s rate increases and other mitigation plans are ineffective in restoring HGI’s operating performance to an adequate level.

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

This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.


Related Companies

For information about each company, including the Best's Credit Reports, group members (where applicable) and news stories, click on the company name. An additional purchase may be required.