HONG KONG–(BUSINESS WIRE)–AM Best 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 for 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, favorable business profile and appropriate management of business risks.
HMF’s risk-adjusted capitalization is valued at a very high level, as measured by Best’s capital adequacy ratio (BCAR), supported by strong earnings retention. Despite the recent rise in market interest rates, which has put pressure on its capital as the valuation of available-for-sale securities has declined, AM Best expects the company’s risk-adjusted capitalization to continue. support the current assessment of balance sheet strength in a more stressed interest environment. rate scenarios. Other positive balance sheet considerations also include good financial flexibility, which has been proven by a track record of successful hybrid and subordinated bond issuances over the past five years, as well as a prudent investment strategy focused on asset-liability management.
AM Best considers HMF’s operating performance to be adequate, with its five-year average return on equity ratio and combined ratio (2017-2021) broadly in line with its national industry average. HMF’s underwriting performance in 2021 was favorable, mainly due to a significant improvement in the results of the motor branch thanks to the rate increases of the previous years and the reduction in the frequency of claims in the context of the pandemic of COVID-19. Despite a potential rebound in claims, the performance of the motor range is expected to remain largely flat in 2022, supported by a broader premium base, improved distribution cost efficiencies and supportive regulations. Meanwhile, the long-term insurance line’s loss ratio remained under pressure in 2021. Nevertheless, AM Best expects this pressure to be partially alleviated going forward, as a large portion of the old The company’s unprofitable medical insurance policies will reach their long renewal cycle in 2023/2024, reflecting the cumulative effect of rate hikes in recent years.
HMF is the second largest non-life insurer in South Korea, with a stable market share of 17% in terms of gross written premiums in 2021 and is a widely recognized brand in its home market. Its strong business relationships with Hyundai conglomerates, including Hyundai Motor Group, provide a stable source of business for its general insurance line. As the company maintains a diversified distribution network, the share of the general agent channel in long-term insurance and the online channel in the auto insurance line is gradually increasing, contributing to the overall business growth these last years.
Negative rating actions could occur if HMF’s risk-adjusted capitalization declines to a level that no longer supports the current assessment of balance sheet strength, or if there is a trend of sustained deterioration in operating performance of the company.
Ratings are communicated to rated entities before publication. Unless otherwise indicated, the ratings have not been changed as a result of this communication.
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