HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Hyundai Insurance (China) Co., Ltd. (HIC) (China). The outlook of these Credit Ratings (rating) remains negative.
The rating affirmations reflect the company’s strong risk-adjusted capitalization. HIC’s capital and surplus nearly tripled to RMB 456 million (USD 67 million) in 2016. In late 2016, HIC received a reinsurance recoverable of approximately RMB 290 million from a lawsuit over the 2013 Hynix Wuxi factory fire in China. Apart from that, credit risk in 2016 also decreased upon the settling of claims related to the Port of Tianjin explosions in 2015.
The company’s loss ratio improved substantially in 2016 in the absence of catastrophe losses compared with the higher claims severity in 2015 from the Tianjin explosions. However, HIC still has a high cost structure that contributes to underwriting losses.
Offsetting rating factors include the company’s volatile results caused by losses in its commercial lines over the past five years. HIC maintains low retention and is highly dependent on reinsurance. In the event of large losses, its gross leverage and reinsurance recoverable (credit risk) increases substantially. This exerts pressure and volatility on its risk-adjusted capitalization.
Positive rating action could occur if HIC displays sustained improvement in its operating results. Negative rating action could occur if there is a material decrease in risk-adjusted capitalization due to deterioration in operating performance.
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