Press Release - AUGUST 23, 2019
AM Best Affirms Credit Ratings of Hanwha General Insurance Company Limited
FOR IMMEDIATE RELEASE
HONG KONG - AUGUST 23, 2019
The ratings reflect HGI’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also reflect various forms of implicit and explicit support the company receives from its parent, Hanwha Life Insurance Co., Ltd. (Hanwha Life).
HGI’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed as very strong, backed by strong growth of capital and surplus, which was driven by net profit retention and the issuance of new shares and hybrid bonds in recent years. Its underwriting and asset leverage, which used to be among the highest in the industry, have improved gradually over the past five years to a level that is now in line with the company’s peers as a result of its improved capitalization. HGI’s investment strategy supports its strong balance sheet strength assessment, with approximately 70% of the total invested assets in fixed income securities.
Factors offsetting HGI’s balance sheet strength include a higher proportion of alternative investment allocation, a wider asset-liability duration gap compared with its domestic peers and a declining interest coverage ratio.
Overall operating performance is assessed as adequate. The company’s underwriting performance has improved over the past five years, although it deteriorated in 2018, in line with the market trend. AM Best expects HGI’s underwriting performance to stabilize after multiple rounds of motor premium hikes in 2019. The company’s overall operating performance is supported by its strong investment yield, which helps to offset volatile underwriting performance.
HGI is the sixth-largest non-life insurance company in South Korea, with a market share of approximately 7% in terms of direct premium written in 2018. Based on its long-term strategic plan, the company has been focusing increasingly on digital innovation through the use of new technologies. HGI also is in the process of setting up South Korea’s first digital non-life insurer in 2019.
HGI receives various forms of implicit and explicit support from its parent company, Hanwha Life, the second-largest life insurance company in South Korea in terms of gross premium written in 2018. Implicit support includes co-branding between the two companies to increase operational synergy, utilizing Hanwha Life’s tied agents for distribution, as well as cooperation in areas such as investments, among others. In addition, HGI has received capital support historically from the Hanwha Group and Hanwha Life during new share issuance.
Negative rating actions could occur if there is a significant deterioration in the company’s risk-adjusted capitalization, or if there is a significant decline in the parent company’s financial strength and credit profile.
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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