The operating performance of BIDV Insurance Corporation (BIC) is assessed as adequate, as evidenced by a five-year average return-on-equity ratio of 8.0% (2015-2019), says AM Best.
The international credit rating agency expects prospective operating performance to remain at an adequate level.
BIC’s combined ratio has trended lower over recent years, with a five-year average of 99% (2015-2019). BIC’s technical performance remains partially constrained by its high operating expense ratio.
Despite this, the company’s overall earnings remain supported by robust investment earnings, emanating mainly from interest income on term deposits.
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of BIC. The outlook of these credit ratings is stable.
The ratings reflect BIC’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also factor in a neutral impact from the company’s ultimate parent, the state of Vietnam, says AM Best.
BIC’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio, which AM Best expects to remain at the strongest level over the medium term. Despite the company’s moderate dividend payout ratio over the past three years, retained earnings have remained sufficient to bolster shareholders’ equity and support business growth.
BIC maintains a conservative investment strategy with approximately 95% of investments held in cash, term deposits and fixed income securities. Other balance sheet considerations include the company’s reliance on reinsurance to support its underwriting capacity for large property and engineering risks, as well as to manage accumulation risks and catastrophe exposure.
AM Best views BIC’s business profile as neutral. In 2019, the company reported gross written premium (GWP) of VND 2.4tn ($105m), with approximately 90% of business sourced from Vietnam and the remaining from Laos. BIC’s common branding and business distribution arising from its intermediate parent, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV Bank), is viewed as a benefit to its business profile.
The company’s main lines of business are motor, commercial property and engineering, personal accident and medical, which collectively accounted for approximately 80% of GWP in 2019. On a net premium basis, the company’s portfolio is focused more on motor, personal accident and medical. Prospectively, AM Best expects growth in BIC’s portfolio to be driven by personal accident and medical business arising from its bancassurance distribution channel.
AM Best considers BIC’s ERM framework as appropriate given the size and complexity of its operations. The company’s risk management framework and capabilities benefit from a level of technical support, expertise and oversight provided by BIDV Bank, as well as from a strategic relationship with a minority interest shareholder; Fairfax Asia.