AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of bbb+ (Good) of Vietnam National Reinsurance Corporation (VINARE) (Vietnam). The outlook of these Credit Ratings (ratings) is stable. Additionally, AM Best has assigned the Vietnam National Scale Rating (NSR) of aaa.VN (Exceptional) to VINARE with a stable outlook.

The ratings reflect VINARE’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

VINARE’s balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which is expected to remain at the strongest level over the medium term. The company’s regulatory solvency position remains comfortably above the minimum requirement by a wide margin. Offsetting balance sheet strength factors include the company’s moderate investment risk, due to its holdings of equity investments, and high dividend payout ratio. Additionally, VINARE exhibits a moderate reliance on retrocession to support its underwriting of large commercial risks; however, the risk associated with this dependence is mitigated partly by the good credit quality of the retrocession panel.

AM Best views the company’s operating performance as strong, supported by its five-year average return-on-equity ratio of 10.2% (2019-2023). Underwriting results remained favourable in 2023, with the company reporting a combined ratio of 98%, supported by favourable underwriting performance from its core property and engineering lines. Investment income remains as the key contributor to the company’s overall earnings, with net investment yield of 10.1% in 2023 (2022: 5.8%). VINARE continued to achieve technical profitability in the first three months of 2024, supported by robust loss ratio and improving expense ratio. Prospectively, AM Best expects the company to continue delivering strong operating performance, supported by favourable underwriting performance and robust investment income.

AM Best considers VINARE’s business profile as neutral. As the national reinsurer of Vietnam, VINARE has established long-standing relationships with local cedants, supporting its position in Vietnam’s insurance market, where it generates the majority of its premium. The company has a well-diversified underwriting portfolio by lines of business, with a good balance between commercial and retail risks. Nonetheless, VINARE is exposed to elevated product risk given its sizable exposure to commercial and industrial risks.

AM Best views the company’s ERM as appropriate given the developed reporting system and prudent risk management approach. Risk management framework and risk modelling capabilities have benefited and are expected to continue developing under the technical support and expertise provided by the company’s second-largest shareholder, Swiss Reinsurance Company Ltd.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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