SINGAPORE: AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of BIDV Insurance Corporation, Vietnam. The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect the company’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings factor in a neutral impact from the company’s ultimate majority ownership by the Vietnam government.
BIC’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). Despite the company’s moderate dividend payout ratio over the past three years, retained earnings have remained sufficient to bolster shareholders’ equity and support business growth.
Other balance sheet considerations include the company’s reliance on third-party reinsurance to increase underwriting capacity for large property and engineering risks, as well as to manage accumulation risks and catastrophe exposure.
AM Best views the company’s operating performance as adequate, as evidenced by a five-year average return-on-equity ratio of 7.7% (2014-2018). BIC’s underwriting performance has consistently operated at a close to a break-even position, with a five-year average combined ratio of 99.1% (2014-2018) and 100.2% for 2018. BIC’s technical performance remains partially constrained by its elevated operating expense ratio.
Despite this, the company’s overall earnings remain supported by robust investment earnings, emanating mainly from interest income on term deposits. AM Best expects prospective operating performance to remain at an adequate level; however, if the company’s underwriting performance deteriorates below a break-even position, or if robust investment returns are no longer achieved, pressure on this assessment could arise.
AM Best assesses BIC’s business profile as neutral. In 2018, the company reported gross written premiums (GWP) of VND 2.3 trillion (USD 98 million), with over 90% of business sourced from Vietnam and the remaining from Laos. BIC’s common branding and business distribution arising from its intermediate parent, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV Bank), is viewed as a benefit to its business profile.
The company’s main lines of businesses are motor, commercial property and engineering, personal accident and medical, which collectively accounted for approximately 80% of GWP in 2018. On a net premium basis, the company’s portfolio is focused more on motor, personal accident and medical. Prospectively, growth in BIC’s portfolio is expected to be driven by personal accident and medical business arising from its bancassurance distribution channel.
AM Best considers the company’s ERM framework as appropriate given the size and complexity of its operations. BIC’s risk management framework and capabilities benefit from a level of technical support, expertise and oversight provided by BIDV Bank, as well as from a strategic relationship with a minority interest shareholder; Fairfax Asia Limited.