SINGAPORE--(BUSINESS WIRE)--A.M. Best has revised the outlooks to positive from stable and affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of BIDV Insurance Corporation (BIC) (Vietnam). BIC is majority owned by the Bank for Investment and Development of Vietnam JSC (BIDV), one of the largest banks in Vietnam.
The revised outlooks reflect BIC’s strengthened risk-adjusted capitalization, following support from Fairfax Asia Limited (Fairfax Asia) as a strategic investor.
BIC’s risk-adjusted capitalization is supported by its low net and gross underwriting leverage. The company also has a conservative investment risk profile consisting mostly of term deposits. In terms of operating performance, BIC has maintained a better-than-average claims performance, and its net income has increased steadily for the past five years. BIC continues to benefit from its affiliation with BIDV in terms of branding, networking and customer outreach.
In 2015, Fairfax Asia acquired 35% of newly issued shares in BIC and became a strategic investor, substantially increasing BIC’s capital and surplus. Fairfax Asia also will bring technical assistance to areas such as underwriting, risk management and information technology, which could benefit BIC in terms of operational efficiency and business profile in the market.
Partially offsetting these positive rating factors is the company’s high expense ratio. Although the company is experiencing strong growth, it remains a small player and has yet to experience any improved economies of scale. Additionally, changes are expected to occur in the corporate structure that could result in a redistribution of capital.
Positive rating actions could result from a continued improvement in the company’s operating performance and the development of a capital allocation policy that would result in strong risk-adjusted capitalization.
Negative rating actions could result from a decline in the company’s risk-adjusted capitalization due to material deterioration in operating performance.
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