AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb+" of Vietnam National Reinsurance Corporation (VINARE) (Vietnam). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect VINARE’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
VINARE’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which remained at the strongest level in 2020. The company has exhibited a high dividend payout ratio over the past five years, although retained earnings have remained robust and sufficient to support business growth. The company’s balance sheet strength assessment is also supported by the stability of its capital adequacy, modest underwriting leverage and retrocession counterparties of good credit quality. Partially offsetting balance sheet factors include the company’s retrocession dependence and exposure to severe catastrophe events. In addition, AM Best views the company’s investment portfolio to have moderate risk. While the majority of invested assets are held in cash, deposits and bonds, the company’s investment portfolio also includes private and public equities.
AM Best views VINARE’s operating performance as strong, with the company having reported a five-year average combined ratio of 95.1% and return-on-equity (ROE) ratio of 9.1% (2016-2020). Underwriting performance has shown volatility in recent years, driven mainly by heightened loss activity in property insurance and growth of personal accident business distributed through bancassurance (Banca PA). Prospectively, AM Best expects recent portfolio remediation measures taken by the company to support robust underwriting performance over the medium term. Investment income also remains a significant driver of overall earnings, despite recent headwinds driven by interest rate declines and some capital market volatility as a result of the COVID-19 pandemic.
AM Best assesses VINARE’s business profile as neutral. The company is the larger of two domestic reinsurers in Vietnam, with gross premium written (GPW) of VND 2.5 trillion (USD 106 million) in 2020. The company benefits from long-standing relationships with a number of local cedants, including some insurers that hold a minority stake in VINARE, which provides a competitive advantage for market access. The company’s underwriting portfolio is moderately diversified by line of business, although geographic diversification is more limited given that the majority of GPW is sourced domestically.
AM Best considers the company’s ERM framework as appropriate given the size and complexity of its operations. AM Best views the company’s risk management framework and capabilities to have benefited over a number of years from the technical support and expertise provided by Swiss Reinsurance Company Ltd, VINARE’s second largest shareholder. Active engagement with key industry stakeholders and ongoing risk monitoring have supported the company in implementing risk control measures in a timely manner.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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