AM Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb” (Good) of Hanoi Reinsurance Joint Stock Corporation (Hanoi Re) – formerly known as PVI Reinsurance Joint Stock Corporation (PVI Re) (Vietnam). The outlook of the FSR is stable. Additionally, AM Best has assigned a Vietnam National Scale Rating (NSR) of aaa.VN (Exceptional) to Hanoi Re with a stable outlook.

The Credit Ratings (ratings) reflect Hanoi 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). The ratings also factor in rating enhancement from Hanoi Re’s ultimate parent, HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G.).

The revised Long-Term ICR outlook reflects an improving trend in Hanoi Re’s balance sheet strength fundamentals. Capital adequacy improved following a capital injection that increased total shareholders' equity from VND 1,085 billion in 2022, to VND 1,786 billion in 2023. Correspondingly, the company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), improved to the strongest level in fiscal-year 2023 from a very strong level in fiscal-year 2022. Notwithstanding, risk-adjusted capitalisation has shown moderate volatility in recent years driven by high dividend payouts and increasing capital requirements arising from business growth and investments. Furthermore, AM Best views the company’s investment portfolio to be of moderate-to-high risk. Although most investment assets are allocated toward cash and term deposits, the remainder is held in non-rated corporate bonds and affiliated private equity investments. Overall, AM Best expects Hanoi Re’s risk-adjusted capitalization to remain at the strongest level over the medium term, supported by controlled growth and sustained capital generation.

AM Best views Hanoi Re’s operating performance as strong, supported by its five-year average return-on-equity ratio of 16.6% (2019-2023). Underwriting results remained favourable in 2023, benefiting from profitable domestic business, which included business sourced from its sister company, PVI Insurance Corporation. Despite favourable underwriting performance, technical margins have thinned in recent years, driven by increases in net commission expenses, with the expense ratio expected to remain elevated over the medium term. Investment returns, consisting mainly of interest and dividend income, is expected to remain as a key contributor to the company’s overall earnings.

Hanoi Re is one of the two domestic reinsurers in Vietnam, with a significant volume of business sourced from PVI Insurance Corporation. Hanoi Re has a moderate underwriting risk given its sizeable exposure to catastrophe-exposed property and engineering lines, although potential losses are partially mitigated by catastrophe retrocession.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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