A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb” of Hanwha General Insurance Company Limited (Hanwha General) (South Korea). The outlook for both ratings is stable.
The ratings reflect the company’s adequate capitalization and the recent improvement in operating results. The risk-adjusted capitalization improved in 2013 primarily due to the issuance of new shares in November 2013.
Hanwha General continues to take considerable measures to enhance its underwriting performance through increases in premium rates and strengthened underwriting controls in major long-term insurance products. In addition, the company maintains effective asset liability management to mitigate any mismatch of duration risk.
Partially offsetting factors are the company’s volatile operating results in the past five years, low profitability of Hanwha General’s long-term insurance products and high underwriting leverage. Since the December 2009 merger of Hanwha Insurance and First Fire & Marine Insurance Co., Ltd., Hanwha General has continued to report volatile operating results due to the sizeable losses from the general line and the continued deterioration in long-term underwriting results. Although most of the legacy products in long-term insurance that led to negative risk margin since the merger are due to be renewed with higher premium rates in 2014, the pace of improvement in profitability is slower than expected.
Positive rating actions could occur if Hanwha can demonstrate an improved track record in operating performance and a strengthening trend in capital on both an absolute and risk-adjusted basis. Conversely, negative rating actions could occur if the company's operating performance and/or risk-adjusted capitalization were to significantly deteriorate.
The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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