HONG KONG, Aug 24 (Bernama-BUSINESS WIRE) -- A.M. Best has upgraded the Financial Strength Rating to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating to “a” from “a-” of Hanwha General Insurance Company Limited (HGI) (South Korea). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect HGI’s balance sheet strength, which A.M. Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. HGI’s ratings also consider the strategic importance to its parent company, Hanwha Life Insurance Co., Ltd. (Hanwha Life).
HGI’s strong balance sheet strength is supported by its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), being at the very strong level after the issuance of hybrid bonds in July 2018. HGI has high but declining asset leverage and premium leverage ratios, as well as a relatively more aggressive investment strategy. The rating upgrades are based on HGI’s improved risk-adjusted capitalization in 2018 due to the issuance of hybrid bonds and an expected high net profit retention for the full fiscal year. The company reclassified a large part of its bond portfolio from available for sale to held-to-maturity in 2018, reducing the potential volatility that a rise in interest rates could bring to its capital and surplus.
HGI’s operating performance has improved over the past five years, mainly driven by increases in net investment income. In terms of underwriting performance, HGI’s loss ratio has declined to the lower range of the industry in 2017. However, its combined ratio remains elevated due to a high expense ratio, reflecting its relatively small premium base relative to its peers.
In regard to business profile, HGI is the sixth-largest non-life insurance company in South Korea. Its market share, in terms of direct premiums written, has slowly increased over the past five years and reached 7% in 2017. HGI benefits from the Hanwha brand and by being a subsidiary of Hanwha Life, South Korea’s second-largest life insurer in terms of premium income in 2017.
HGI is important to Hanwha Life in terms of business and earnings diversification. It has received capital support from Hanwha Life and the Hanwha Group upon issuing new shares. HGI also benefits from access to Hanwha Life’s distribution channel, and from cooperation in areas such as information technology, asset management and risk management.
Positive rating action is unlikely in the near term. Negative rating actions could occur if there is a significant deterioration in the company’s risk-adjusted capitalization. Negative rating actions also could occur if there is a significant decline in the parent company’s financial strength and credit profile.
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 A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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