AM Best Affirms Credit Ratings of NongHyup Property and Casualty Insurance Company Limited

Business Wire

HONG KONG--(BUSINESS WIRE)--
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of NongHyup Property and Casualty Insurance Company Limited (NH P&C) (South Korea). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect NH P&C’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect the implicit and explicit support the company receives from its ultimate parent, National Agricultural Cooperative Federation (NACF).

NH P&C’s risk-adjusted capitalisation is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Despite the recent issuances of supplementary capital securities, the company’s Korean-Insurance Capital Standards (K-ICS) ratio showed a material decline in 2024 and through the first half of 2025, primarily due to various regulatory guideline changes. Prospectively, AM Best expects NH P&C to maintain its solvency position well above the regulatory minimum and recommended levels with a focus on improving asset and liability management and its strong financial flexibility. Particularly, the company’s financial flexibility is supported by its good accessibility to the capital market and financial support from its immediate parent, NongHyup Financial Group Inc. (NHFG). NH P&C’s investment portfolio is conservative, consisting mainly of fixed-income assets of good quality.

NH P&C’s operating performance is assessed as adequate, with a return-on-equity ratio of 5.7% and a combined ratio of 95.1% (net/net) in 2024, as calculated by AM Best. The company’s general property/casualty business, including government policy insurance, continues to show moderate volatility, for example, driven by severe weather events or wildfires. While the company’s profitability of long-term insurance remained largely in line with its peers, NH P&C’s growth of new business contractual service margin (CSM) has demonstrated a declining trend over the last two years (2022-2024). Thus, AM Best will monitor NH P&C’s improvement in generating its new business CSM, as it will play an instrumental role in achieving stable future profits and provide a buffer against volatility in the general P/C insurance segment. AM Best expects the company’s investment profits to continue supporting its overall profitability.

NH P&C is a domestic non-life insurer in South Korea, with a 3.7% market share in terms of gross insurance service revenue in 2024. The company is an exclusive provider of crop insurance in the country, which is largely operated under the general principle of “no profit no loss,” and a major provider of other government policy insurance products for farmers, such as livestock and agricultural vehicle insurance. NH P&C focuses on expanding sales of protection-type products with high margins to gradually improve the profitability of its long-term insurance line; however, its market presence in the long-term insurance segment remains modest due to strong market competition. Distribution remains highly concentrated in the cooperative channel, which is a network of NACF’s members.

As a wholly owned subsidiary of NHFG, which is the financial arm of NACF and one of the largest financial groups in South Korea, NH P&C is strategically important to NACF, given its role as the exclusive provider of government policy insurance products to cooperative members. Additionally, AM Best recognises NHFG’s capability and strong willingness to provide timely financial support to NH P&C, should the need arise.

Negative rating actions could occur if there is a significant deterioration in NH P&C’s balance sheet strength fundamentals and a further decline in its domestic solvency ratio from the current level. Negative rating actions also could arise if the level of support or the company’s strategic importance to its ultimate and immediate parents is reduced to a degree that no longer supports the current level of enhancement. While it is thought to be unlikely, positive rating actions could occur if NH P&C’s business profile improves in a sustainable manner, for example, through successful channel diversification that results in a materially enhanced market presence without deterioration in its risk-adjusted capitalisation and operating profitability.

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.