AM Best Affirms Petrolimex Insurance Ratings With Stable Outlook

KUALA LUMPUR, Dec 6 (Bernama) -- Global credit rating agency, AM Best has affirmed Vietnam’s Petrolimex Insurance Corporation (PJICO) financial strength rating of B++ (good), the long-term issuer credit rating of “bbb” (good), and the country National Scale Rating (NSR) of aaa.VN (exceptional).

In a statement, AM Best said these credit ratings (ratings) have a stable outlook, which reflected PJICO’s balance sheet strength, was assessed as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

PJICO’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio.

The company’s prospective risk-adjusted capitalisation is expected to be supported by good internal capital generation, taking into account its planned business growth, as it maintains a conservative investment strategy, with a majority of its investments held in cash and term deposits.

The company also relies moderately on reinsurance for its underwriting capacity for large property and engineering risks, as well as to manage accumulation risks and catastrophe exposure, which is partly mitigated by the good credit quality of the reinsurance panel.

AM Best assesses PJICO’s operating performance as adequate, evidenced by a five-year weighted average return-on-equity and combined ratios of 12.7 per cent and 96.9 per cent (2019-2023), respectively, as calculated by the credit rating agency.

The company’s overall earnings remain driven by a stable stream of investment income. However, PJICO posted thinner underwriting margins in 2023, mainly due to higher loss ratio in the health insurance business.

While underwriting profits from commercial lines including property and marine cargo businesses have typically benefitted from low net loss ratios and good reinsurance commission income, the elevated expense ratio continues to be an offsetting factor.

The recent Typhoon Yagi, which hit Vietnam in the third quarter of this year, may lead to greater volatility in PJICO’s underwriting performance over the near term, though the impact is expected to be mitigated by its reinsurance programme.

The rating agency considers PJICO’s business profile as neutral. The company’s business profile benefits from its common branding and preferential access to cargo business arising from its largest non-majority shareholder, Vietnam National Petroleum Group.

-- BERNAMA