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FOR IMMEDIATE RELEASE
HONG KONG - NOVEMBER 21, 2014 12:11 PM (EST)
A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of "bbb" of Vietnam National Reinsurance Corporation (VINARE) (Vietnam). The outlook for both ratings is stable.
The ratings reflect VINARE's solid risk-based capitalization, consistent operating performance, improving enterprise risk management and strong shareholder support.
VINARE's growth in reported surplus has been supported by its favorable underwriting and operating performance over the past five years. The company has also made major progress in enterprise risk management by implementing an economic capital model, engaging actuaries in the reserve review process and accessing the risk exposure by natural catastrophe model. The risk tolerance levels were defined and reviewed regularly.
The ratings also recognize the support from VINARE's major shareholders, namely State Capital Investment Corporation (SCIC) and Swiss Reinsurance Company Ltd (Swiss Re). 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 and the volatile underwriting results in some business segments.
The challenging economic environment in Vietnam, including high dependence on imports, currency weakness and high credit growth, could place pressure on VINARE's profitability. Investment profitability will be limited due to the bad debt issues in the banking system and the downward trend of interest rates.
Among the key business lines, property and marine hull are the poorly performing segments in the past five years. Also, the underwriting result from a key cedent was unsatisfactory in 2013 due to large risk losses.
Future upward rating actions could occur if VINARE continues to improve its capitalization, maintains favorable operating performance and strengthens its business profile. Conversely, negative rating actions could occur if the company's risk-adjusted capitalization declines to a level below A.M. Best's expectations due to material deterioration in operating performance or aggressive business growth.
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.
Key insurance criteria reports utilized:
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which 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.