Hanwha Life strengthens leverage post-debt redemption

The insurer’s solvency capital ratio under K-ICS was 183.8% in 2023

Whilst Hanwha Life Insurance’s (HWL) ratio declined to 163% in the first half of 2024 (H1 2024) due to tighter discount rates, Fitch Ratings still expects it to improve. 

The company's financial leverage also strengthened after redeeming $1b in hybrid securities in April 2023, with its leverage ratio estimated below 15% in H1 2024.

HWL's solvency capital ratio under K-ICS was 183.8% in 2023, well above the 100% minimum standard. 

The Korean insurer's improving operating performance, highlighted by new business Contractual Service Margin (CSM) growth, will support future profits. 

In 2023, new business CSM increased to $1.9b (KRW2.5t), up from $1.2b (KRW1.6t) in 2022. Additionally, the return on equity rose to 6.9% in the first half of 2024, from 4.9% in 2023.

Fitch anticipates HWL will continue focusing on risky assets to enhance investment yield, though the company faces potential risks from overseas commercial real-estate exposure. 

Nonetheless, its strong capital base is expected to mitigate potential losses. Asset-liability management remains proactive, with the duration gap reduced to 0.38 years by the end of 1H24.

HWL holds a solid business franchise as one of South Korea’s top three life insurers, with a 13% market share by assets.

($1.00 = KRW1,333.16)