2013-09-06 18:02:01 -
A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb+” of Samsung Vina Insurance Limited (SVI) (Vietnam). The outlook for both ratings is stable.
The ratings reflect SVI’s robust risk-adjusted capitalization, strong profitability and solid enterprise risk management (ERM) framework, in addition to the wide range of support the company receives from the shareholders of Samsung Fire and Marine Insurance Co., Ltd. (SFM) (Korea) and Vietnam National Reinsurance Corporation (Vietnam) regarding business development in Vietnam.
Although strong growth in premium income led to a gradual decline in capitalization in recent years, SVI is expected to maintain its robust capitalization, which supports its current ratings given its strong profitability.
SVI’s gross premium income increased by
54% to VND 874 billion in fiscal year 2012, driven by strong growth in its marine and cargo line, predominantly from the business generated by the Samsung Group of companies.
SVI reported strong growth of net profit in the past five years, owing to the continuous improvement in its underwriting results. Its reported combined ratio in fiscal year 2012 stood at 7%, which is favorable compared to its five-year weighted average combined ratio of 34%. The improvement in the company’s combined ratio was due largely to the substantial increase in its reinsurance commission income, which led to an overall expense ratio of -38% in fiscal year 2012, compared to the expense ratio of 29% five years ago.
SVI maintains a solid ERM program that is in line with SFM’s framework, which enables SVI to tightly manage its risk profile. SVI keeps a highly liquid investment portfolio that mainly consists of bank deposits. The company continues to enhance its reinsurance protection against natural catastrophe risks, while most of its business is generated from areas that are relatively less exposed to typhoons, floods and earthquakes.
An offsetting rating factor is the intensifying competition in the non-life insurance market in Vietnam. Partly due to rapid expansion in the insurance business, SVI is expected to report a substantial increase in operating expenses in the next three years. The relatively high level of inflation and rising labor costs are expected to exert pressure on the company’s cost structure in the mid term.
Upward rating actions for SVI could occur if there is a material improvement in its risk-adjusted capitalization or enhanced support is provided by its parent companies.
Downward rating actions for SVI could occur if there is a material deterioration in its risk-adjusted capitalization, driven by worse than expected profitability.
The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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