AM Best Removes From Under Review With Developing Implications and Affirms Credit Ratings of Hyundai Insurance (China) Co., Ltd.

HONG KONG--(BUSINESS WIRE)--AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Hyundai Insurance (China) Co., Ltd. (HIC) (China). The outlook assigned to the Credit Ratings (ratings) is stable.

The ratings reflect HIC’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

HIC’s capital and surplus was bolstered by capital injections when the company introduced new strategic investors in March 2020. Based on its business plan, the company has targeted a proactive expansion of its underwriting portfolio through leveraging the broad customer base and technological advantages of those new shareholders. AM Best expects the company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain robust and supportive of the very strong balance sheet strength assessment over the short to intermediate term, despite exhibiting a fast declining trend as underwriting risk increases rapidly.

While HIC historically reported net losses prior to 2016, the company strengthened its underwriting controls and delivered consecutive years of net profit with lower claims volatility and stable investment yields during 2016 to 2020. Notwithstanding, the company projects material net losses over the next three years, partly attributed to sizeable costs associated with human resources and system expenses in tandem with the transformation of its business model to focus more on personal line products including motor, accident and health.

Despite the anticipated rapid expansion in business scale over the next few years, AM Best expects HIC to remain a small player in China’s non-life market. Moreover, in view of the continued intense market competition, potential adverse deviations to the company’s business plan may lead to uncertainties in the turnaround of its operating profitability.

Positive rating actions could occur if the company demonstrates successful execution of its business plan; for example, achieving faster-than-expected turnaround and sustained improvement in its operating performance, while maintaining a supportive level of risk-adjusted capitalisation. AM Best will continue to monitor HIC’s business execution risk.

Negative rating actions could occur if there is significant and adverse deviation in HIC's business execution compared to its business plan, leading to material deterioration in the company’s risk-adjusted capitalisation or operating performance beyond AM Best’s expectations. Negative rating actions could also occur if the company experiences major failure in risk management such that it no longer supports the current ERM assessment.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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