SINGAPORE--(BUSINESS WIRE)--AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “bbb” and affirmed the Financial Strength Rating of B++ (Good) of PVI Insurance Corporation (PVI Insurance) (Vietnam). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect PVI Insurance’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). In addition, PVI Insurance benefits from rating enhancement from HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G. or the HDI group).
The Long-Term ICR upgrade follows HDI group’s increased ultimate ownership of PVI Insurance and the resulting implicit support that AM Best expects the subsidiary to benefit from over the near term. During the first half of 2019, the HDI group obtained a majority ultimate ownership. Despite PVI Insurance’s operations accounting for a small component of HDI V.a.G.’s overall revenues and earnings, the company is considered important to the HDI group’s international expansion plans.
PVI Insurance’s balance sheet strength assessment is underpinned by risk-adjusted capitalization that AM Best expects to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). A partially offsetting balance sheet factor continues to be the company’s high reinsurance usage and dependence to enable the underwriting of large commercial property, energy and engineering risks.
The company has a track record of adequate performance, with a five-year average combined ratio of 95% and a return on equity ratio of 11% (2014-2018). Despite the company’s overall underwriting profitability, its personal accident and motor portfolios, which were the largest lines of business based on net premium written in 2018, have experienced performance pressure over recent years. The company’s commercial property and industrial risks portfolio, which have benefited from low net loss experience and favorable inward commissions from reinsurers, remains a key driver of technical profitability.
PVI Insurance’s business profile is assessed as neutral. The company is the second-largest insurer in Vietnam’s non-life insurance sector with a market share of 15% in 2018, based on gross premium written. The company has experienced stagnant premium growth over the past three years as a result of a reduction in motor business amid market competition, and a notable decline in commercial property risks. PVI Insurance’s profile benefits from its relationship with the PetroVietnam group (PVN), as the company sources significant energy project business from PVN.
AM Best considers the company’s ERM approach as appropriate given the size and complexity of its current operations. Going forward, AM expects PVI Insurance to benefit from the HDI V.a.G. group’s international product expertise in areas of risk selection, pricing and reserving, as well as its oversight and support in respect of risk management.
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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