SINGAPORE--(BUSINESS WIRE)--A.M. Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “bbb” and affirmed the Financial Strength Rating (FSR) of B++ (Good) of Vietnam National Reinsurance Corporation (VINARE) (Vietnam). The outlook of the Long-Term ICR has been revised to stable from positive, while the FSR outlook remains stable.
The rating upgrade reflects VINARE’s consistent operating performance, strong risk-adjusted capitalization and good business profile in Vietnam’s non-life reinsurance market.
VINARE has maintained good operating performance throughout the past few years from underwriting and investment activities. The company achieved a five-year average combined ratio of approximately 89% from 2012 to 2016, lower than many direct insurers in Vietnam. Tighter underwriting in its fire business helped improve its combined ratio in 2016.
VINARE’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is supported by its low net and gross underwriting leverage. The company’s investment portfolio is very conservative, with a majority of its assets invested in cash and deposits.
In terms of business profile, VINARE continues to receive support from its shareholders, namely the State Capital Investment Corporation (SCIC), Swiss Reinsurance Company Ltd (Swiss Re) and other direct insurers in Vietnam who are also its cedants. SCIC supports the company by providing access to some insurance business from the Vietnamese government. Swiss Re, VINARE’s second-largest shareholder, provides the company with technical support, modeling capabilities and access to international businesses. By having its cedants as shareholders, VINARE also benefits from a steady stream of profitable domestic business.
An offsetting rating factor is the company’s low earnings retention. This could impede capital growth relative to its cedants, which are experiencing capital increases from organic growth and foreign investment. In addition, Vietnam continues to attract international and regional reinsurance capacity.
While the company is well-positioned at its current rating level, negative rating actions may arise from material deterioration in operating performance or risk-adjusted capitalization.
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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