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 VINAREs balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
VINAREs balance sheet strength assessment is underpinned by risk-adjusted capitalization that remains at the strongest level, as measured by Bests Capital Adequacy Ratio (BCAR). Capital adequacy is supported by the companys low net underwriting leverage, albeit partially offset by a moderate risk investment strategy that includes holdings of listed and unlisted domestic equities. While the company has exhibited a high dividend payout ratio over the past five years, retained earnings have remained robust and sufficient to support business growth. Other balance sheet considerations include the companys high dependence on retrocession to manage its exposure to catastrophe events, accumulations and large single risks.
AM Best views the companys operating performance as strong, as evidenced by a five-year average combined ratio of 89.8% and a return-on-equity ratio of 9.7% (2014-2018). Performance fundamentals for underwriting and investment activities have been stable over the past five years, as well as favorable when compared with regional reinsurance peers. Prospectively, AM Best expects the companys operating performance to remain at a strong level, despite anticipation of a slight deterioration in the combined ratio over the medium term. This is expected to result from continued competitive market conditions, as well as the companys planned shift in its portfolio mix to include a greater allocation to personal accident business.
VINAREs business profile is assessed as neutral. The company is the larger of two domestic reinsurers in Vietnam, with gross written premium (GWP) of VND 1.8 trillion (USD 78 million) in 2018. The company benefits from long-standing relationships with a number of local cedants, including some insurers that hold a minority stake in VINARE. The companys underwriting portfolio is moderately diversified by line of business, but with over 70% of GWP emanating from Vietnam.
The companys ERM framework is considered appropriate given the size and complexity of its operations. Both the companys risk management framework and capabilities are viewed to have benefited from technical support and expertise provided over a number of years by Swiss Reinsurance Company Ltd, VINAREs second-largest shareholder.
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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