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FOR IMMEDIATE RELEASE
HONG KONG - JUNE 10, 2022 09:41 AM (EDT)
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) 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 assesses as strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.
HMF’s risk-adjusted capitalisation is assessed at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by solid profit retention. Despite the recent rise in market interest rates, which put pressure on its capital as the valuation of available-for-sale securities decreased, AM Best expects the company’s risk-adjusted capitalisation to remain supportive of the current balance sheet strength assessment under more stressed interest rate scenarios. Other positive balance sheet considerations also include good financial flexibility, which was proven by a track record of successful issuance of hybrid and subordinated bonds over the past five years, as well as a prudent investment strategy with a focus on asset-liability management.
AM Best views HMF’s operating performance to be adequate with its five-year average return-on-equity ratio and combined ratio (2017-2021) being largely in line with its domestic industry’s average. HMF’s underwriting performance in 2021 was favourable mainly due to a material improvement in auto line results driven by rate hikes in prior years and reduced claims frequency amid the COVID-19 pandemic. Despite a potential rebound in claims, the auto line performance is expected to remain largely stable in 2022, supported by larger premium base, improving distribution cost efficiency and favourable regulations. Meanwhile, loss ratio for the long-term insurance line remained pressured in 2021. Notwithstanding, AM Best expects this pressure to be partially alleviated going forward as a large portion of the company’s unprofitable legacy medical indemnity policies will reach their long renewal cycle in 2023/2024, reflecting accumulated effect of rate hikes from recent years.
HMF is the second-largest non-life insurer in South Korea, with a stable market share of 17% in terms of gross premium written in 2021 and is a widely recognised brand in its domestic market. Its solid business relationships with Hyundai conglomerates, including Hyundai Motor Group, serve as a stable source of business for its general insurance line. While the company maintains a diversified distribution network, the share of general agents channel in long-term insurance and online channel in auto insurance line are on a gradual rise, contributing to overall business growth in recent years.
Negative rating actions could occur if HMF’s risk-adjusted capitalisation declines to a level that no longer supports the current balance sheet strength assessment, or there is a sustained deteriorating trend in the company’s operating performance.
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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.