AM Best Affirms Credit Ratings of Hyundai Marine & Fire Insurance Co., Ltd.

HONG KONG--(BUSINESS WIRE)--AM 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 stable.

The ratings reflect HMF’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).

HMF’s risk-adjusted capitalisation is at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by stable capital growth from profit retention, and increased unrealised gains from its securities holdings under the low interest rate environment. As a listed company, HMF has favourable financial flexibility, proven by the successful issuances of hybrid and subordinated bonds in the capital market over the past five years.

HMF’s capital adequacy is supported further by its conservative investment portfolio, with over 80% made up of fixed income assets, while the company continues to increase its asset duration for better asset-liability management. HMF’s debt leverage remains favourable, though it is offset partially by declining interest coverage, due mainly to dividend payouts for hybrid bonds totalling KRW 500 billion issued in 2018, coupled with a recent deterioration in profitability.

Overall operating performance is assessed as adequate despite a recent decline in net profit, mainly owing to a surge in claims paid on long-term medical indemnity and auto lines, which also impacted the industry negatively. Although HMF’s underwriting performance deteriorated in conjunction with the composite, investment income continues to be favourable and supportive of operating profit despite persistent pressure on spreads against a backdrop of falling interest rates.

HMF ranks second in South Korea’s non-life insurance segment, a position that the company has maintained for a long time amid heated competition, and holds a 17% share of the market in terms of direct premium written in 2019. The company has strong brand recognition in its domestic market and a good business relationship with Hyundai Motor Group, which is a stable source of business for its general insurance line. HMF also has a stable and diverse distribution channel mix for long-term insurance, its largest business line, while it actively seeks to expand its presence in the online channel for auto insurance.

The ratings acknowledge HMF’s appropriate ERM approach, with an effective risk management framework in place. The company demonstrates prudent risk management capabilities, relative to the complexity of its operations and the profile of its core risks.

Negative rating actions could occur if the company’s operating performance or risk-adjusted capitalisation deteriorates significantly.

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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