Hanwha General Insurance Co. Ltd. Rating Affirmed At 'A'; Outlook Stable

  • We believe Hanwha insurance group has a very strong presence in Korea's insurance market supported by a well-established franchise and extensive controlled distribution channels.
  • In our view, HGI plays an integral role for the insurance group's strategy to provide one-stop insurance services across non-life and life insurance products.
  • We assess HGI to be a core subsidiary of Hanwha Life and believe the insurer will receive extraordinary support when needed.
  • We are affirming our 'A' long-term issuer credit and financial strength ratings on HGI.
  • The stable outlook reflects our view that HGI will remain a core subsidiary and that the insurance group will sustain its modest capitalization over the next two years.
HONG KONG (S&P Global Ratings) Dec. 20, 2018--S&P Global Ratings affirmed its 
'A' long-term issuer credit and financial strength ratings on Korea-based 
Hanwha General Insurance Co. Ltd. (HGI). The outlook is stable.

We affirmed the rating because Hanwha insurance group has a very strong market 
presence with a long operating history in the Korea insurance industry, and an 
established franchise across the country. We also expect the group to sustain 
its modest capitalization on the back of its stable underwriting performances 
and prudent investment strategy. The insurer's proactive capital management 
through its established access to capital markets supports its credit profile.

The ratings on HGI reflect our view that the insurer is integral to the 
insurance group's strategy to provide a wide range of insurance products to 
its customers. In our view, the provision of non-life insurance products will 
support the wider insurance group's business diversification efforts. Compared 
with its life insurance parent, HGI should have stronger profitability. 
Proactive pricing adjustments of HGI's legacy high-loss medical indemnity 
policies will lead its underwriting performances to improve, in our view. 

As a material contributor to the insurance group, HGI benefits from capital 
support, strategic management support, and risk management. HGI accounted for 
about 12% of the insurance group's shareholder equity and 22% of net profit in 
2017. We therefore view HGI as a core subsidiary of the insurance group. 

While majority owned by Hanwha Corp. (unrated), we assess the insurance 
group's credit profile as delinked from that of its parent group. Korea's 
restrictive regulations around the support of corporate affiliates and the 
strong independence of its business operations underpin this assessment. We 
believe the insurance group will maintain a high level of independence for its 
board, four out of seven of whom are external members. 

Furthermore, the insurance group's public listing and the presence of other 
institutional shareholders should support management oversight. In our view, 
Hanwha Corp. has a weaker credit profile than the insurance group. Hanwha 
Corp., together with its affiliates, collectively owns about 45% of Hanwha 
Life as of September 2018. In turn, Hanwha Life owns 51.4% of HGI. 

We expect the insurance group to maintain its very strong market presence in 
Korea. Hanwha Life and HGI's long operating history since its establishment in 
1946 underscores its brand name and reputation. The insurance group's 
extensive controlled distribution channels provides it with strong access to 
the Korean population. Hanwha Life and HGI accounted for about 13% and 7% 
market share, respectively, in terms of gross premiums during the first half 
of 2018.

The insurance group should be able to sustain its modest capital and earnings 
over the next two years, backed by stable underwriting performances and 
prudent investment strategy. In our view, the group's focus on protection-type 
products will improve profit margin contribution. We expect the group to 
achieve modest premium growth in 2019-2020, given the competitive and mature 
market. We believe the group's reducing exposure to legacy high-yield policies 
will slowly support capital improvements. As of September 2018, fixed-rate 
policies with more than 6% interest rates account for about 28% of total 

In addition, the group's issuance of US$1 billion in regulatory compliant 
hybrid capital securities in April 2018 supports its underlying 
capitalization. We regard these securities as having intermediate equity 
content. We expect the group's consolidated debt position to remain modest. As 
of September 2018, the group's consolidated regulatory solvency ratio stood at 
222% (December 2017: 206%).

We consider the group's increasing overseas investments to support its efforts 
to enhance its asset duration in preparation for International Financial 
Reporting Standards 17. In our view, the group's investment strategy is 
prudent, given the majority allocation towards good quality fixed-income 
instruments. We expect the insurer to actively manage its foreign exchange 
risk through the use of currency forwards and swap hedges.

The stable outlook reflects our view that HGI will remain a core subsidiary of 
Hanwha insurance group over the next two years. The outlook also reflects our 
expectation that the group will sustain its well-established business presence 
and modest capitalization over the period. We also expect the group to 
maintain strong independence in its business operations from the wider Hanwha 

We may lower the ratings on HGI if we lower the insurance group's credit 
profile. While we consider this to be unlikely over the next two years, this 
could happen if the group's: (1) capitalization falls below our expectation 
due to an aggressive investment strategy toward risky alternative investments 
or equities; or (2) the financial burden increases due to the group's 
aggressive debt leverage, resulting in higher sensitivities towards funding 

We may also lower the ratings if our view of HGI's strategic importance to the 
insurance group dilutes due to its persistent underperformance compared with 
domestic non-life peers.  

We may upgrade HGI if Hanwha insurance group's credit profile improves. This 
could happen if the group's capitalization strengthens substantially over the 
next two years, while HGI maintains its status as a core subsidiary. The 
improvement in capital may occur if the wider group reports robust earnings 
and maintains a prudent investment strategy over the next two years. That 
said, we view this as a less-likely scenario.
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