2013-11-01 14:44:03 -
A.M. Best Asia-Pacific Limited has assigned a financial strength rating of B++ (Good) and issuer credit rating of “bbb” to Vietnam National Reinsurance Corporation (VINARE) (Vietnam). The outlook assigned to both ratings is stable.
The ratings reflect VINARE’s solid risk-based capitalization, consistent operating performance, sound liquidity and its strong presence in Vietnam’s non-life reinsurance market.
VINARE’s reported surplus has steadily grown over the last five years reaching over VND 2.4 trillion in 2012. The company’s growth in reported surplus has been supported by its favorable operating performance over the past five years. VINARE achieved a five-year average combined ratio of approximately 90% along with positive investment results during 2008 to 2012. VINARE’s risk-adjusted capitalization level, as measured by Best’s Capital Adequacy Ratio
(BCAR), is supportive of its current ratings.
VINARE has over 65% of its total investments held in cash and deposits, with a total of over VND 2 trillion at end of fiscal year 2012. The company is expected to maintain its sound liquidity through its investment allocation strategy.
As the first professional reinsurer in Vietnam, VINARE has a close relationship with local insurance companies in Vietnam giving its strong access to the market. Twelve Vietnam direct insurers own a combined share of 23.8% of VINARE.
The ratings also recognize the financial and operational support from the major shareholders of VINARE, namely State Capital Investment Corporation (SCIC), which has a 40.4% share, and Swiss Reinsurance Company Limited (Swiss Re), with a 25% share. SCIC supports VINARE by providing access to the Vietnam government and economy in terms of information and networking. Swiss Re is the second-largest shareholder of VINARE since early 2008, providing the company with technical support, product management, modeling capabilities and access to international businesses.
Offsetting these positive rating factors are the impact on VINARE from Vietnam’s slowing economic growth, increasing competitive reinsurance market in the Asia-Pacific region and the company’s volatile underwriting results in some of its business segments.
The challenging economic environment in Vietnam could place pressure on VINARE’s profitability and business growth. To improve the unfavorable underwriting results in identified lines of business and cedants, VINARE will adjust pricing, tighten terms and conditions and be more selective in accepting business.
Future upward rating actions could occur if VINARE continues to improve its capitalization, maintain favorable operating performance, strengthen its business profile in local and overseas reinsurance markets and strengthen its risk management capabilities. Conversely, negative rating actions could occur if the company’s risk-adjusted capitalization declines to a level below A.M. Best’s expectations or if its operating performance deteriorates significantly.
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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