HONG KONG–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A-
(Excellent) and the Long-Term Issuer Credit Rating of “a-” 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
categorizes as strong, as well as its adequate operating performance,
limited business profile and appropriate enterprise risk management. The
ratings also consider the support received from the ultimate parent
company, the National Agricultural Cooperative Federation (NACF).
NH P&C’s strong balance sheet is underpinned by its risk-adjusted
capitalization at the very strong level, as measured by Best’s Capital
Adequacy Ratio (BCAR). Although the investment portfolio is
conservative, the company’s asset has grown three times faster than
capital and surplus over the past five years. This high asset leverage
is an offsetting factor as it increases volatility in NH P&C’s capital
and surplus due to fluctuation in asset valuation.
NH P&C has a track record of profitable operating performance,
attributed to a growing net investment income, which fully offset the
company’s negative underwriting results. Underwriting performance has
deteriorated over the past five years, driven by the deterioration in
the loss ratio and expense ratio. Conversely, net investment income more
than doubled over the same period, reflecting the fast growth in
As a small non-life insurer in South Korea’s competitive insurance
market, NH P&C has a limited business profile. In 2017, the company had
a market share of 4.1% in terms of direct premium written. The company’s
business mix has a high exposure to the long-term savings business,
which has a low profit margin and carries a high level of interest rate
risk. In the distribution channel, NH P&C benefits from exclusive access
to NACF’s member cooperatives, from which it generates the majority of
its premium income.
NACF is a key entity in the execution of government policies and
provision of support to farmers in South Korea. Therefore, NH P&C is
important to NACF as a provider of policy insurance to farmers. In 2017,
government policy insurance represented 64% of NH P&C’s gross premium
written in general insurance, being a significant top line contributor.
In crop insurance, the major policy insurance product, NH P&C receives
reinsurance support and coverage of expenses from the government. Given
its strategic role, NH P&C received capital injections in 2012, 2014 and
Positive rating actions are unlikely in the near term. Negative rating
actions could occur if there is a material deterioration in the
company’s risk-adjusted capitalization. Negative rating actions could
occur if the level of support or the strategic importance to its
ultimate parent company decrease significantly.
Ratings are communicated to rated entities prior to publication.
Unless stated otherwise, the ratings were not amended subsequent to that
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 Understanding
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Sergio Hidenori Agena
Associate Financial Analyst
Manager, Public Relations
908 439 2200, ext. 5159
Director, Public Relations
439 2200, ext. 5644