Hanwha Life Insurance’s capital adequacy is expected to surge under K-IFRS 17

S&P Global Ratings anticipate sustained capital bolstering over two years due to HLI's strategic risk management.

A positive outlook awaits Hanwha Life Insurance (HLI) as it anticipates sustained capital strengthening over the next two years, supported by prudent management of interest rate risk and asset-liability duration mismatches, according to S&P Global Ratings. 

HLI's robust operational performance, moderate business expansion, and cautious investment strategies will bolster its capital adequacy. As Korea's second-largest life insurer, HLI's diversified business operations ensure a strong market presence while maintaining operational independence.

The revised capital model criteria had minimal impact on HLI's creditworthiness, but it led to an increased capital buffer at the 99.50% confidence level. This enhancement primarily stemmed from higher total adjusted capital (TAC), including value-in-force (VIF), and improved risk diversification benefits. 

However, adjustments in interest rate risk charges and capital recalibration partially offset these gains. Under K-IFRS 17, HLI's capital adequacy is expected to further improve at the 99.80% confidence level, offering clearer insights into future profit support.

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Ratings for HLI could be raised if sustained capital adequacy at the 99.80% confidence level is projected, alongside balanced business growth and conservative investment strategies. 

However, the outlook may be revised to stable if HLI's capital position remains at the 99.50% confidence level due to increased asset-liability duration mismatches or weakened internal capital generation resulting from lower profitability or aggressive shareholder return policies.

Regarding Hanwha General Insurance (HGI), its positive outlook reflects its continued status as a core subsidiary of HLI, with ratings and outlook linked to its parent. 

Similar expectations of sustained capitalization and prudent risk management drive the positive outlook for HGI over the next two years.

HGI's ratings could be upgraded if HLI maintains robust capital adequacy, avoids aggressive investment strategies, and balances business growth. 

The outlook for HGI may shift to stable if HLI's capital position remains at the 99.50% confidence level due to increased asset-liability mismatches or weakened internal capital generation.