AM Best Affirms Credit Ratings of PVI Reinsurance Joint-Stock Corporation

SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Ratings of “bbb” (Good) of PVI Reinsurance Joint-Stock Corporation (PVI Re). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect PVI Re’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings also reflect rating enhancement from HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G.).

PVI Re’s strong balance sheet strength is underpinned by its risk-adjusted capitalisation at the very strong level as of year-end 2021, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital adequacy is expected to have declined during 2022, driven by high dividend payouts and increasing capital requirements arising from business growth and rising equity investment risk. However, the company's BCAR is projected to recover to the strongest level following a planned capital injection in first quarter 2023. Other balance sheet considerations include the company’s moderate-to-high risk investment portfolio with an increasing allocation to affiliated private equity investments in recent periods, and high retrocession dependence.

PVI Re has demonstrated a track record of strong operating performance, as evidenced by a five-year average return on equity ratio of 16% (2017-2021), and the company is expected to maintain its strong profitability in 2022. PVI Re has generated consistently robust underwriting profits, supported by affiliated domestic business, particularly in the commercial and industrial lines. The loss ratio in 2022 is expected to have increased due to claims normalisation given the relaxation of pandemic restrictions and the expansion of its retail reinsurance portfolio, which generated a lower underwriting margin. The company plans to reduce its motor reinsurance portfolio over the short term due to its lower underwriting profitability. The acquisition expense ratio has shown an increasing trend and is expected to remain elevated. Investment income remains a consistently positive component of overall earnings.

PVI Re is one of the two domestic reinsurers in Vietnam, with a significant volume of business ceded by its affiliated company, PVI Insurance Corporation. PVI Re has a moderate business concentration in catastrophe-exposed property and engineering lines, which are mainly sourced domestically, albeit partially mitigated by its catastrophe retrocession.

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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