SINGAPORE–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) 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).
The company’s balance sheet strength reflects risk-adjusted capitalisation at the strongest level at year end 2021, as measured by Best’s Capital Adequacy Ratio (BCAR). This capital adequacy ratio is underpinned by the company’s low net underwriting leverage and retrocession counterparties of good credit quality, despite higher investment risk in 2021. VINARE’s regulatory solvency level, which continued to exceed the minimum requirement by a wide margin, increased notably during 2021 due to a considerable reduction in the company’s personal accident premiums. Offsetting factors to the company’s balance sheet strength remain, including exposure to catastrophe risk and VINARE’s high dividend payout ratio.
The company has demonstrated strong operating performance over the past five years, with an average combined ratio of 96.4% and an average return-on-equity ratio of 9.4% (2017-2021), as calculated by AM Best. Underwriting results from the company’s core lines of business remain satisfactory, although there has been unfavourable claims experience in marine hull business. In addition, amidst the low interest rate environment induced by the COVID-19 pandemic, increased investment allocation to bonds has helped the company to maintain its investment yield. Prospectively, AM Best expects VINARE to continue delivering strong operating performance, which could be supported by the company’s underwriting discipline and improved pricing conditions in several lines of business.
AM Best assesses the company’s business profile as neutral. The company has established long-standing relationships with local cedants and accumulated in-depth knowledge of its domestic insurance market for many years. Furthermore, VINARE continues to receive strong support from its key shareholders including State Capital Investment Corporation in terms of business strategy and corporate governance; and Swiss Reinsurance Company Ltd (Swiss Re) in terms of underwriting and risk management expertise as well as product innovation. Although VINARE’s geographic spread is largely concentrated in its domestic market, the company has a well-diversified underwriting portfolio by line of business, and with a good balance between commercial and retail risks.
AM Best considers the company’s ERM to be appropriate given VINARE’s clear risk appetite, developed reporting system and prudent risk management approach. With technical support from Swiss Re, VINARE has been able to utilise an economic capital model to monitor and manage the company’s key risks properly.
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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