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FOR IMMEDIATE RELEASE
HONG KONG - JULY 17, 2015 12:08 PM (EDT)
A.M. Best has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of "bbb-" of BIDV Insurance Corporation (BIC) (Vietnam). The outlook for both ratings is stable.
The ratings reflected BIC's favorable risk-based capitalization, strategic support from the Bank for Investment and Development of Vietnam JSC (BIDV) and the continuously positive operating results.
BIC continued to strengthen its chartered capital in 2014, according to its business plan. The company's moderate underwriting leverage and investment risk profile contribute to the company's favorable risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR).
BIDV continued to support BIC's business growth through its bank brand, network and customer base. Moreover, BIC maintained its promising operating performance due to its positive underwriting results and stable investment performance.
Subject to regulatory approval, Fairfax Asia Limited (Fairfax Asia) will acquire 35% of the newly issued shares in BIC and become a strategic investor. Fairfax Asia will provide BIC with technical assistance in areas such as underwriting management, risk management, information technology and in developing distribution channels.
Offsetting rating factors are the relatively high expense ratio, Vietnam's high economic risk and the credit quality of investment assets.
BIC relatively high expense ratio continues to drag on the underwriting performance due to the business-growth strategy and staff-related expenses. The company will focus on the cost-effective business from BIDV and the retail segment for a lower combined ratio in the future.
In addition, the challenging economic environment in Vietnam, including high dependence on imports and high credit growth, could place pressure on BIC's profitability. Investment profitability will be limited due to the bad debt issues in the banking system and the downward trend of interest rates. Furthermore, the majority of BIC investments were in bonds and time deposits, which were rated as non-investment grade by other international credit rating agencies. The credit risk of BIC investment portfolio was high.
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best's Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.