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FOR IMMEDIATE RELEASE
SINGAPORE - SEPTEMBER 29, 2021 11:19 AM (EDT)
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of BIDV Insurance Corporation (BIC) (Vietnam). The outlook of the Credit Ratings (ratings) is stable.
The ratings reflect BIC’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also factor in a neutral impact from the company’s ultimate corporate parent, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV Bank).
BIC’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which AM Best expects to remain at the strongest level over the medium term, 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 its shareholders’ equity and support new business growth. The company maintains a conservative investment strategy with over 90% of investments held in cash, term deposits and fixed-income securities. Other balance sheet considerations include the company’s reliance on reinsurance to support its underwriting capacity for large property and engineering risks, as well as to manage accumulation risks and catastrophe exposure.
AM Best assesses the company’s operating performance as adequate, with a five-year average return-on-equity ratio of 8.9% (2016-2020). BIC’s combined ratio has trended lower in recent years, with a five-year average of 98.2% (2016-2020), partially driven by tightened underwriting guidelines. BIC’s technical performance remains partially constrained by its high operating expense ratio. The company’s operating expense ratio has increased over recent years in part driven by the significant growth in BIC’s personal accident and health insurance through its bancassurance channel, which exhibits high distribution costs but low loss experience. Despite this, AM Best expects BIC’s combined ratio to remain at a profitable level prospectively. The company’s overall earnings have been supported by robust investment earnings, emanating mainly from interest income on term deposits.
AM Best views BIC’s business profile as neutral. Despite the COVID-19 environment, the company reported 12.9% growth in gross written premium (GWP) in 2020, reaching VND 2.8 trillion (USD 119 million). In terms of business mix, approximately 90% of GWP was sourced from Vietnam and the remaining from Laos. AM Best views BIC’s common branding and business distribution through its corporate parent, BIDV Bank, as beneficial to its business profile. The company’s main lines of business are motor, commercial property (including engineering), personal accident and health, which collectively accounted for over 80% of GWP in 2020. On a net premium basis, the company’s portfolio is focused more on motor, personal accident and health. Prospectively, AM Best expects growth in BIC’s portfolio to remain driven by business from its bancassurance distribution channel.
AM Best considers BIC’s ERM framework as appropriate given the size and complexity of its operations. The company’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.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.