SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb-” of Petrolimex Insurance Corporation (PJICO) (Vietnam). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect PJICO’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
PJICO’s balance sheet strength assessment is underpinned by risk-adjusted capitalization that remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Despite the company having exhibited a moderate dividend payout ratio over recent years, retained earnings over this period along with a capital injection in 2017, have been sufficient to support business expansion. Other balance sheet considerations include the company’s notable exposure to reinsurance counterparties that are non-rated on an international financial strength rating scale.
AM Best views the company’s operating performance as adequate, evidenced by five-year average operating and combined ratios of 91% and 98%, respectively (2014-2018). Underwriting performance reflects a combination of favorable profitability on cargo and miscellaneous lines of business, which have typically exhibited low net loss ratios and good reinsurance commission income, partially offset by marginal performance on motor and health lines of business over recent years. Overall earnings are supported by a stable stream of investment income, which is generated largely from interest on cash and deposit holdings.
AM Best assesses PIJCO’s business profile as neutral. In 2018, the company ranked as the fifth-largest non-life insurer in Vietnam with a market share of approximately 6%, based on gross written premiums. The company’s profile is viewed to benefit from its partial ownership, common branding and preferential access to cargo business arising from its largest shareholder, Vietnam National Petroleum Group (Petrolimex). In addition, PJICO leverages on Petrolimex’s countrywide network of petrol stations to support the distribution of its retail insurance products, with this sales channel growing quickly in recent years.
AM Best considers the company’s ERM approach as appropriate given the size and complexity of its current operations. The company has embarked on risk management framework and process improvements, which have been visible in 2018 and 2019, albeit further development and integration to the business remains ongoing.
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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