KUALA LUMPUR, Feb 11 -- AM Best has placed under review with negative implications the Financial Strength Rating of A (excellent) and the Long-Term Issuer Credit Rating of ‘a’ for Hanwha General Insurance Company Limited (HGI) South Korea.
The under review status follows HGI’s public disclosure on Jan 31, of a consolidated net loss of KRW 69 billion (US$59 million) for its preliminary fiscal-year 2019 results. (US$1 = RM4.14)
HGI has maintained consistent profitability since 2014, although a deterioration in results was observed from 2018, according to a statement.
The deterioration in HGI’s underwriting performance since 2018 was due mainly to inadequate pricing, consequently leading to its inability to catch up with increasing loss costs and expenses in auto and long-term insurance business lines.
While its bottom line had been supported by a stable stream of investment income, which helped mitigate underwriting volatility, the company is also expected to report sizeable impairment losses of KRW 25 billion (US$21 million) from its securities holdings for 2019.
HGI is seeking ways to improve its underwriting profitability, including rate increases for its auto and medical indemnity insurance lines, product restructuring and tighter underwriting.
AM Best will continue to hold discussions with HGI’s management team on its capital and business plans to assess the company’s medium-term balance sheet strength in order to resolve the under review with negative implications status.
Negative Credit Rating actions could occur if HGI’s projected risk-adjusted capitalisation over the medium term decreases to a level that no longer supports the current balance sheet assessment, or if its interest coverage remains insufficient to meet interest commitments.
More details at www.ambest.com.
-- BERNAMA
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