AM Best, the global credit rating agency specialising in the insurance industry, has upgraded two key ratings of PVI Insurance Corporation (PVI Insurance) thanks to its strong financial position and robust performance.
PVI Insurance's Financial Strength Rating was lifted to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating to “a-” (Excellent) from “bbb+” (Good).
The rating upgrades reflect PVI Insurance’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also factor in rating enhancement from PVI’s parent company, HDI.
The ratings also reflect the company’s consistently favourable underwriting performance and outstanding overall profitability. Robust underwriting performance is supported by profitable commercial and industrial businesses.
PVI Insurance has reported consistent technical profitability and a five-year average return-on-equity (ROE) ratio of 17 per cent (2017-2021). The company also posted strong premium growth of 17 per cent in 2022.
AM Best expects PVI Insurance will continue to maintain its underwriting profitability with a net combined ratio at approximately the low-90 per cent range over the medium term. Investment returns, arising mainly from interest and dividend income, have been consistently supportive of operating earnings.
PVI Insurance’s risk-adjusted capitalisation is expected to decrease, albeit remaining at a strong level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). The decline is mainly due to insurance business growth, higher investment exposure and a high dividend payout ratio.
The company has a moderate risk investment portfolio, with an increasing allocation to non-rated corporate bonds and affiliated private equity investments, although a majority of investments remain allocated to cash and term deposits. Key offsetting factors include its high reinsurance dependence.
PVI Insurance has a strong market position in commercial and industrial lines of business, including energy, property, engineering, aviation and marine insurance, supported by its affiliation with the PetroVietnam (PVN) group, one of the largest state-owned oil and gas corporations in Viet Nam. The company also receives support from HDI V.a.G. to enhance its technical expertise, service offerings, risk management and governance.
AM Best considers the company’s ERM approach as appropriate given the size and complexity of its current operations. — VNS