AM Best affirms PVI Reinsurance Joint-stock Corporation Credit Ratings

KUALA LUMPUR, Feb 14 -- Global credit rating agency, AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of ‘bbb’ (Good) of PVI Reinsurance Joint-stock Corporation (PVI Re) Vietnam.

Based on a statement, the outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect PVI Re’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM). In addition, PVI Re benefits from rating enhancement from HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G. or the HDI group).

The ratings of PVI Re were placed under review with developing implications on July 1, 2021, following an HDI Global SE announcement it had partially divested its shareholding in PVI Holdings, the immediate parent of PVI Re, to comply with a regulatory condition imposed by the State Securities Commission of Vietnam.

As a result, the ultimate ownership of PVI Holdings’ total charter capital by HDI V.a.G. fell below 50 per cent, causing uncertainty over PVI Re’s eligibility to continue receiving rating enhancement from AM Best in respect of its ownership, integration and support from HDI group.

The latest rating actions follow a period of further shareholding changes, which has seen the HDI group regain majority ultimate ownership of PVI Holdings. As a result of this, AM Best continues to afford rating enhancement to PVI Re in respect of its ultimate ownership by and the implicit support from the HDI group.

PVI Re’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation that remained at the strongest level as of year-end 2020, as measured by Best’s Capital Adequacy Ratio (BCAR). However, capital adequacy is likely to decline over the near term driven by high dividend payouts and increasing capital requirements arising from a projected increase in equity investments and underwriting risks.

While AM Best views the company’s investment portfolio to be of moderate risk, underwriting results are becoming increasingly constrained by acquisition costs, which have been gradually rising over time.

Investment income has remained a consistently positive component of overall earnings, although investment yields are likely to be constrained over the near term by low interest rates.

PVI Re’s business profile is assessed as limited. PVI Re is the smaller of two domestic reinsurers in Vietnam.

For more information, visit www.ambest.com.

-- BERNAMA