Lotte Non-Life Insurance corporate logo (CI). (Photo: Lotte Non-Life Insurance)

 

 

[Alpha Biz= Paul Lee] Korea Ratings has downgraded the credit rating of Lotte Non-Life Insurance after the insurer received a management improvement order from financial authorities.

According to Korea Ratings on June 6, the insurer’s insurance financial strength rating (IFRS) was lowered from ‘A’ to ‘A-’, while the outlook remains “Negative.”

The agency also downgraded the ratings of subordinated bonds from ‘A-’ to ‘BBB+’ and hybrid capital securities from ‘BBB+’ to ‘BBB.’

The rating action follows a regulatory escalation of prompt corrective measures by the Financial Services Commission. The commission rejected Lotte Non-Life Insurance’s management improvement plan on May 28 and raised the corrective action level to “management improvement requirement” on June 4.

Korea Ratings said the regulatory action has heightened uncertainty in management, risk control, insurance operations, liquidity and capital-raising conditions.

The agency also warned that possible net outflows from retirement pension reserves could increase liquidity pressure. About 78% of the insurer’s retirement pension assets are held by corporate clients, making potential withdrawals—including from companies affiliated with the Lotte Group—a key factor for future liquidity management.

Additionally, weaker market confidence could limit the company’s ability to raise capital needed to strengthen its K-ICS solvency ratio, the agency noted.

Song Mi-jung, senior researcher at Korea Ratings, said further downgrades could be considered if the company’s management improvement plan is rejected again or if its business and financial indicators deteriorate further.

Despite the downgrade, Korea Ratings noted that some financial indicators have recently improved. The company’s net profit doubled to 51.3 billion won last year from 24.2 billion won a year earlier, while its K-ICS ratio rose from 120% at the end of March last year to 159% by year-end, supported by reduced risk assets and higher interest rates boosting net asset values.

 

 

 

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