The results of Hyundai Marine & Fire Insurance Co's (HMF) long-term insurance lines are expected to improve from premium rate increases and the company's efforts to improve the medical indemnity loss ratio trend, while both auto and general lines remain relatively stable, said AM Best.
HMF is one of the leading non-life insurers in South Korea.
AM Best assesses HMF’s operating performance as adequate, with a return-on-equity ratio of 7.8% and a combined ratio of 96.0% (net/net, IFRS 17-basis) in 2023, as calculated by AM Best. The release of the contractual service margin from long-term insurance products contributed to a large portion of underwriting profits, although it was offset partially by increased medical claims and sizeable onerous contract provisions in 2023.
AM Best expects HMF’s interest income to remain the major source of investment profits while additional volatility under IFRS 9 is viewed to be at a manageable level.
Ratings affirmed
AM Best has affirmed HMF’s Financial Strength Rating of ‘A’ (Excellent) and the Long-Term Issuer Credit Rating of ‘a’ (Excellent). The outlook of these credit ratings is ‘Stable’.
Balance sheet strength
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). Under IFRS 17, HMF’s capital and surplus increased significantly at year-end 2023 largely due to the market-based valuation of liability and a higher interest rate environment while its balance sheet fundamentals are not viewed to be affected materially.
The company has good financial flexibility, demonstrated by successful issuances of hybrid bonds and subordinated debts in the capital markets over the past years while maintaining healthy debt leverage and coverage ratios.
HMF’s investment strategy incorporates its philosophy to focus on asset-liability management to manage capital volatility with a large portion of its investment portfolio placed in high-quality fixed-income assets.
Business profile
HMF has a stable market share of about 18% in terms of insurance service revenue in 2023. 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 lines.
HMF maintains a diversified portfolio, in terms of product offerings and distribution channels, to achieve stable business revenue. The company focuses on the general agency channel in the long-term insurance line and the online channel in auto insurance for growth and profitability.