SINGAPORE – MAY 17, 2019

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 VINARE’s 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).

VINARE’s balance sheet strength assessment is underpinned by risk-adjusted capitalization that remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital adequacy is supported by the company’s 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 company’s high dependence on retrocession to manage its exposure to catastrophe events, accumulations and large single risks.

AM Best views the company’s 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 company’s 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 company’s planned shift in its portfolio mix to include a greater allocation to personal accident business.

VINARE’s 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 company’s underwriting portfolio is moderately diversified by line of business, but with over 70% of GWP emanating from Vietnam.

The company’s ERM framework is considered appropriate given the size and complexity of its operations. Both the company’s 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, VINARE’s second-largest shareholder.