HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Hyundai Marine & Fire Insurance Co., Ltd. (HMF) (South Korea). The outlook of these Credit Ratings (ratings) is negative.
The ratings reflect HMF’s balance sheet strength, which A.M. Best categorizes as strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).
Risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is at the strong level. The outlooks remain negative due to HMF’s high asset leverage and premium leverage ratios. However, the company's management expects that the announced intention to issue a sizeable hybrid security in 2018 will improve its risk-adjusted capitalization.
Operating performance has improved since 2015, following the industry trend. Underwriting performance is improving due to premium rate hikes over the aforementioned period in the company’s major business lines, including auto insurance and long-term insurance. Nevertheless, HMF’s five-year average combined ratio still trails its major peers.
In regard to business profile, HMF is the second largest non-life insurer in South Korea in terms of direct premiums written. The company has been able to defend its market share over the past five years despite strong competition, benefiting from a well-recognized brand in its domestic market and a long-standing business relationship with the Hyundai Motor group. However, an offsetting rating factor is that HMF is geographically concentrated in its highly competitive domestic market.
HMF’s ERM is appropriate for its risk profile. The company is continuously improving its ERM, in addition to preparing for the upcoming changes from IFRS 17 ad K-ICS. HMF is developing a new internal system, improving its asset and liability management strategy, and preparing the Own Risk and Solvency Assessment.
Positive rating actions are unlikely in the near future. Negative rating actions could occur if the issuance of the hybrid securities in 2018 does not take place as announced, or if the issuance is significantly lower than the announced amount.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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