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Photo courtesy of Hyundai Marine & Fire Insurance |
[Alpha Biz= Kim Jisun] Korea Ratings (KR) has revised its outlook on Hyundai Marine & Fire Insurance from “Stable” to “Negative,” citing deteriorating profitability and increasing capital adequacy management burden amid tightening regulatory standards.
In a report issued on July 1, KR maintained the insurer’s current Insurance Financial Strength Rating (IFSR) at ‘AAA’ and its subordinated bond rating at ‘AA+’, while lowering the outlook on both to “Negative.”
KR stated that while Hyundai Marine & Fire possesses a diversified portfolio focused on long-term protection-type policies, its underwriting profit volatility remains high. The agency attributed this to persistent losses from differences between expected and actual claims (experience variance), in addition to actuarial assumption adjustments that have affected the broader insurance industry.
Since the introduction of the new accounting standards, Hyundai Marine & Fire has reported approximately KRW 200 billion in annual experience variance losses. From 2023 through last year, the company’s underwriting margin averaged 5.7%, significantly below the industry average of 8.9%.
KR also noted the challenge of maintaining solvency. Despite issuing KRW 2.6 trillion in subordinated bonds since the transition to the K-ICS capital regime, the insurer’s Risk-Based Capital (RBC) ratio has declined from 178.6% in March 2023 to 157.0% at year-end, with a slight recovery to 159.4% as of March 2024. KR explained that this was due to expanded risk charges stemming from changes in actuarial assumptions, which increased the capital requirement.
Although the recent rebound was aided by the issuance of hybrid securities, KR warned that the ratio remains below industry average and could face further downward pressure as discount rate adjustments and regulatory tightening continue.
KR concluded by stating it will closely monitor Hyundai Marine & Fire’s long-term capital adequacy trajectory, factoring in market positioning, profitability, new business inflows, and asset-liability management (ALM) capabilities.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
