A.M. Best Assigns Ratings to Hyundai Insurance (China) Co., Ltd.

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has assigned a financial strength rating of B++ (Good) and an issuer credit rating of “bbb+” to Hyundai Insurance (China) Co., Ltd. (HIC) (China). The outlook for both ratings is stable.

The ratings reflect HIC’s adequate risk-adjusted capitalization, ample liquidity with conservative investment portfolio and diversified underwriting portfolio. Additionally, A.M. Best believes that HIC is positioned to benefit from the operational support of its parent, Hyundai Marine and Fire Insurance Co. Ltd, with regard to management expertise and reinsurance.

HIC was established in March 2007 and provides a wide range of insurance products including commercial property, liability, engineering and cargo. Recently, the company started underwriting motor business to further diversify its premium sources and increase its competitiveness in the China market. By leveraging the Hyundai brand name, HIC tapped into the Korean customer base in China, which accounted for more than 95% of HIC’s premium in 2007.

The company’s underwriting portfolio is supported by a comprehensive reinsurance arrangement in place with a panel of professional reinsurers. A.M. Best believes HIC’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is supportive of the current ratings and is likely to remain at an adequate level over the next three years, with its prospective business growth and low investment risks.

HIC has a conservative investment portfolio, with almost 100% of its invested assets in cash and term deposits. This conservative investment strategy has enabled the company to produce a stable return, particularly during the recent global financial turmoil, although the investment yield will be subject to the movement in short-term interest rates going forward.

Partially offsetting rating factors are uncertainties associated with HIC’s underwriting profitability in the medium term and the execution risk in relation to its business plan.

Given the lack of critical mass and significant set-up costs in the early stages of operation, HIC expects to achieve break-even results in four to six years. In view of the prevailing competitive market conditions and the continuing entry of new market participants, A.M. Best remains cautious about HIC’s ability to execute its business plan. As such, any adverse deviation from its business plan could challenge its anticipated break-even period.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.