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

AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) 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 assesses as strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.

HMF’s risk-adjusted capitalisation is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital and surplus at year-end 2024 decreased considerably amid the declining interest rates in its domestic market and discount rates cut by the local regulator, largely due to long-duration liabilities that are highly sensitive to interest rate movements. HMF has good financial flexibility, demonstrated by a proven track record of successfully issuing supplementary capital securities. However, AM Best notes that HMF’s financial leverage has increased following recent debt issuances to support its local solvency ratio, while its coverage ratio remains at a healthy level. The company’s investment strategy continues to focus on asset-liability duration matching to reduce interest rate risk and manage capital volatility, with a large portion of its investment portfolio placed in high-quality fixed income assets.

HMF’s operating performance is assessed as adequate, with a return-on-equity ratio of 15.8% and a combined ratio of 92.2% (net/net) in 2024, as calculated by AM Best. HMF’s long-term insurance line performance has been volatile in recent years driven by both its own claims experience and tightened regulatory guidelines on actuarial assumptions. However, AM Best expects that the company’s various efforts to improve new business profitability will bolster its long-term line profit fundamentals over the coming years. While the company’s auto line profitability is facing pressure due to the cumulative effect of prior rate cuts and inflationary pressures on repair costs, the general line showed improvement in 2024. HMF’s interest income, which is a major source of its investment profits, increased further in 2024, partly attributable to an expansion of its investment asset base following recent supplementary debt issuances.

HMF remains one of the largest non-life insurers in South Korea, with a stable market share of approximately 18%, in terms of gross insurance service revenue in 2024, underpinned by its diversified product and distribution channel mix. The company benefits from its solid business relationships with Hyundai conglomerates, including Hyundai Motor Group, which provide a steady source of business for its general insurance line.

Negative rating actions could occur if there is a significant deterioration in HMF’s balance sheet strength fundamentals. Negative rating actions could also occur if there is a sustained and material deterioration in its operating performance. While it is thought to be unlikely, positive rating actions could occur if the company’s balance sheet strength fundamentals demonstrate sustained improvement.

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 Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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