SINGAPORE, Dec 10 (Bernama-BUSINESS WIRE) -- AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Bao Minh Insurance Corporation (BMI) (Vietnam). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect BMI’s balance sheet strength, which AM Best assesses 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 majority ownership by the State Capital Investment Corporation (SCIC), which is the sovereign wealth fund of Vietnam.
BMI’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation that is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital adequacy remains sufficient to support planned business growth despite limited capital generation over recent years. AM Best views BMI’s investment portfolio to be of moderate risk. Whilst the majority of investments are allocated toward term deposits, the company maintains a portion of its investments in higher risk assets including non-rated corporate bonds, real estate, a joint venture and other equity investments. BMI also maintains a basic approach to asset liability management despite some exposure to longer-duration products within its business mix.
AM Best views the company’s operating performance as adequate, as demonstrated by a five-year average return-on-equity ratio of 8.3% (2016-2020). BMI has generated underwriting profits consistently in recent years, although its high expense ratio continues to be an offsetting factor to the company’s underwriting performance. Claims experience were more favourable in 2020 compared with 2019, supported by a lower loss ratio in motor, personal accident and health insurance. However, the expense ratio has increased as more business was sourced through its higher cost distribution channels. Investment returns are expected to remain constrained over the near term given prevailing low domestic interest rates. Prospectively, BMI plans to review its allocation to domestic fixed income securities for investment yield enhancement.
AM Best assesses BMI’s business profile as neutral. BMI is ranked as the fourth-largest non-life insurer in Vietnam based on 2020 gross premiums written, although its market share has shown a gradual reduction over the years. BMI’s underwriting portfolio is viewed as diversified by line of business although the company has a single-market concentration to Vietnam. BMI’s business profile benefits from a level of business referral from its majority shareholder, SCIC, albeit a divestiture by this shareholder is expected over the near to medium term.
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