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FOR IMMEDIATE RELEASE
HONG KONG - JUNE 14, 2019 01:11 PM (EDT)
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Hyundai Marine & Fire Insurance Co., Ltd. (HMF) (South Korea). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect HMF’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.
HMF’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed as very strong, supported by the issuance of hybrid bonds worth KRW 500 billion (approximately USD 450 million) in August 2018. Aside from the impact of hybrid bond issuance, the company benefited from further enhancement in its capitalization due to an increase in unrealized gains on its substantial holding of available-for-sale bonds, following the recent downward trend of market interest rates in South Korea.
Historically, HMF has reported a higher underwriting and asset leverage than the industry average; however, this is now in line with the overall industry level, due to the company’s recently improved capitalization. An offsetting factor is a declining interest coverage ratio, which AM Best expects to further drop in 2019, with the full-year dividend payment for its newly issued hybrid bonds.
Overall operating performance is assessed as adequate, as demonstrated by HMF’s stable earnings stream, as well as its combined ratio, which is in line with the industry average. Although underwriting performance deteriorated in 2018, owing to increasing losses in the auto insurance line, the insurer’s strong investment earnings backed by growing investment assets helped to support its overall performance.
With a market share of 17% in terms of direct premium written in 2018, HMF is the second-largest non-life insurer in South Korea, a position that the company has maintained for a long time amid increasing competition. The company has a widely recognized brand in its domestic market and a solid business relationship with Hyundai Motor Group, which is a stable source of business for its general insurance line. In addition, HMF has a diversified distribution channel strategy that supports its favorable business profile assessment.
Negative rating actions could occur if the company’s operating performance or risk-adjusted capitalization deteriorates significantly.
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 Understanding 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.
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