AM Best Affirms Credit Ratings of Post-Telecommunication Joint Stock Insurance Corporation

AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb" (Good) of Post-Telecommunication Joint Stock Insurance Corporation (PTI) (Vietnam). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect PTI'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 company's risk-adjusted capitalisation, as measured by Best's Capital Adequacy Ratio (BCAR), remained at the strongest level in 2020. PTI's investment portfolio is conservative with a significant allocation to cash and deposits, albeit there are some exposures to non-rated fixed-income instruments. The company's capital adequacy continues to be under pressure from an increase in underwriting risk, which has outpaced the company's capital generation for some time. Prospectively, underwriting and investment risks are forecast to grow moderately over the medium term, which could reduce the company's risk-adjusted capitalisation.

Over the past five years, PTI reported a satisfactory average combined ratio of 97.3% (2016-2020) and an average return-on-equity ratio of 8.1%. Whilst the company recorded a favourable loss ratio in the low forties, its operating expense ratio was high due to acquisition costs and material operational expenses. As a result of the COVID-19 pandemic, PTI's business development has been hampered as shown by the marked decline in the growth rates of its gross written premium. Nonetheless, investment results arising from interest income and dividends continued to contribute adequately to the company's net profits.

PTI is the third-largest non-life insurer in Vietnam, with a market share of approximately 11% in terms direct written premium in 2020. The company led the market in a number of key segments. In particular, it was ranked first in motor insurance and second in health insurance in 2020. Although PTI continues to face intense price competition in motor insurance, it differentiates from other insurers on high quality services instead of relying on discounting. The company has a strategic partnership with Vietnam Post Corporation, which provides PTI with exclusive access to the corporation's extensive network. Furthermore, the company benefits considerably from its key shareholders' expertise in investment, underwriting and capital management.

PTI's ERM is supported by a comprehensive risk framework with clear risk appetite and proper control measures. The company adopts an appropriate reinsurance programme with low deductible levels and sufficient coverage for very large risk events. Risk management capabilities are aligned with the key risk profiles and are expected to be enhanced further by knowledge transfer from one of the company's shareholders, DB Insurance Co., Ltd.

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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