HONG KONG–(BUSINESS WIRE)–AM Best has placed under review with developing implications the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Hyundai Insurance (China) Co., Ltd. (HIC) (China), following the company’s announcement on July 26, 2019, that it plans to raise additional capital through four new investors, pending regulatory approval.
HIC and its parent company, Hyundai Marine & Fire Insurance Co., Ltd. (HMF), have entered into a capital injection agreement with four new investors for HIC: Legend Holdings Corporation (Legend Holdings); Dirun (Tianjin) Technology Co., Ltd. (Dirun); Anhui Easy-Biz Digital Technology Co., Ltd. (Easy-Biz); and Ningbo Meishan Bonded Port Area Sequoia Yaosheng Equity Investment Partnership (LP) (Yaosheng). Under the agreement, Legend Holdings, a diversified investment holding company based in Beijing, China, and Dirun, a Tianjin-based company focused on computer and information technology development and services, will each inject RMB 533 million (USD 77 million) into HIC. Easy-Biz and Yaosheng will inject RMB 25 million (USD 3.6 million) each into HIC.
Legend Holdings, who is the largest shareholder of its better-known subsidiary, Lenovo Group Limited, holds both strategic and financial investments across various sectors, including but not limited to information technology and financial services. Legend Holdings has been listed on the Hong Kong Stock Exchange since 2015, with more than RMB 83 billion (USD 12 billion) in net assets at year-end 2018.
Dirun has RMB 10 billion (USD 1.5 billion) in paid-in capital and is a wholly-owned subsidiary of Didi Chuxing Technology Co., Ltd. (DiDi), which operates China’s leading mobile transportation and ride-hailing platform with more than 500 million users. HMF will not participate in the capital injection, and will instead maintain its existing paid-in capital of RMB 550 million (USD 80 million) in HIC. In total, the new capital amounts to approximately 2.3 times HIC’s net assets as at Dec 31, 2018. Immediately after the capital injection, HIC’s paid-in capital will increase from RMB 550 million (USD 80 million) to RMB 1.7 billion (USD 247 million). HMF’s stake in HIC will be diluted to 33% from 100%, while Legend Holdings and Dirun will each hold 32% stake.
AM Best expects HIC’s future strategic cooperation with its new investors to strengthen the company’s distribution network and business growth, as well as to promote innovation and portfolio diversification in the long term. In addition, the capital injection could potentially strengthen HIC’s risk-adjusted capitalization in the medium term, depending on the company’s new business and capital management plan. AM Best expects HMF to continue to provide support to HIC in various areas, including business generation and reinsurance cessions, before the transaction is completed, after which HMF’s control over HIC is expected to weaken. The under review status reflects uncertainties over HIC’s future strategic direction and business plans at this stage.
The transaction remains subject to regulatory approval, and HIC’s ratings will remain under review until the close of the transaction. AM Best will continue to hold discussions with HIC’s and HMF’s management teams on future business and management plans to fully assess the impact to HIC’s credit profile.
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