AM Best affirms credit ratings of BIC

HaI nguyen

AM Best has affirmed the Financial Strength Rating of B++ (Good) and the LongTerm Issuer Credit Rating of “bbb” (Good) of BIDV Insurance Corporation (BIC). The outlook of the credit ratings is stable.

The ratings reflect BIC’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 ultimate corporate parent, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV).

BIC’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which AM Best expects to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). Despite the company’s moderate dividend payout ratio over the past three years, retained earnings have remained sufficient to bolster its shareholders’ equity and support new business growth. The company maintains a conservative investment strategy with over 90 percent 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 assesses the company’s operating performance as adequate, with a five-year average return-onequity ratio of 8.9 percent (2016-2020). BIC’s combined ratio has trended lower in recent years, with a five-year average of 98.2 percent (2016-2020), partially driven by tightened underwriting guidelines. The company’s operating expense ratio has increased over recent years in part driven by the significant growth in BIC’s personal accident and health insurance through its bancassurance channel, which exhibits high distribution costs but low loss experience. Despite this, AM Best expects BIC’s combined ratio to remain at a profitable level prospectively. The company’s overall earnings have been supported by robust investment

BIC logo seen on its headquarters building

earnings, emanating mainly from interest income on term deposits.

AM Best views BIC’s business profile as neutral. Despite the Covid-19 environment, the company reported a 12.9 percent growth in gross written premium (GWP) in 2020, reaching VND2.8 trillion (USD119 million). In terms of business mix, approximately 90 percent of GWP was sourced from Vietnam and the remaining from Laos. AM Best views BIC’s common branding and business distribution through its corporate parent, BIDV, as beneficial to its business profile. The company’s main lines of business are motor, commercial property (including engineering), personal accident and health, which collectively accounted for over 80 percent of GWP in 2020. On a net premium basis, the company’s portfolio is focused more on motor, personal accident and health. Prospectively, AM Best expects growth in BIC’s portfolio to remain driven by business 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, as well as from a strategic relationship with a minority interest shareholder, Fairfax Asia Limited.

According to Forbes Vietnam, BIDV Insurance Corporation (BIC) is one of the 25 leading financial brands in Vietnam in 2021. BIC is also one of eight leading non-life insurance companies in terms of market share of direct premium revenue and among the top three companies in this field with high profitability in the market. In 2021, despite the impact of the Covid-19 pandemic which takes its toll on Vietnam’s economy and the world, BIC continues to be consistent with the revenue growth pan in association with operational efficiency. BIC said it will strive to reach VND3,000 billion in premium revenue.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.