The rating upgrades reflect HGI’s improved risk-adjusted capitalization and operating results, with positive growth momentum in premium revenue. HGI also benefits from the implicit support provided by its parent company, Hanwha Life Insurance Co., Ltd. (Hanwha Life). In
HGI’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), has improved over the past three years mainly driven by the company’s effort to tightly control the required risk capital amount through a conservative reinsurance scheme in the major line of long-term insurance.
Operating performance has steadily improved over the same period driven by the recovery in underwriting performance and the gradual increase in investment income. Since fiscal-year 2013, HGI implemented a wide range of measures to improve profitability, particularly in long-term insurance, leading to a decline in the long-term risk loss ratio. HGI also has achieved stronger investment yields than the industry over the period, primarily through the higher proportion of investments in fixed income assets such as social overhead capital projects that offer high and stable returns.
Partially offsetting these positive rating factors are the persistently low interest rates in the domestic market, which put pressure on the investment margin and could negatively impact risk-adjusted capitalization after new tighter regulations take effect.
While positive rating actions are unlikely, negative rating actions could occur if there is considerable deterioration or significant volatility in operating performance that materially affects the company’s risk-adjusted capitalization.
The action follows an accepted appeal from HGI, in which new information was provided that enhanced A.M. Best’s opinion of the company’s level of risk-adjusted capitalization.
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 rating(s) 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.
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