Hanwha Life to keep near-term capital strength despite low rates

There is enough buffer to resist volatile assets and support growth.

Persistently low interest rates are likely to suppress Hanwha Life’s earnings growth, although it will be able to sustain its capital strength and operational stability in the near term, a Fitch Ratings report revealed.

The insurer is expected to maintain an adequate capital buffer to withstand asset volatility and support business growth. Its regulatory risk-based capital ratio stood at 235% at end-2019 and 239% at end-2020, well above the 100% regulatory minimum.

Net income rose 72% to $174m (KRW197b) partially due to steady gains from mortality and expense. Its new business value margin also increased, reflecting its ability to optimise its product mix. Pre-tax return on assets averaged 0.3% in the three years to Q3 2020.

“HWL has been proactive in managing the cost of its negative-spread burden. It focuses on the sale of higher-margin protection-type policies and readily adjusts its policy crediting rate in response to changing interest rates. Management has tried to match the duration of liabilities with that of assets,” the report concluded.