AM Best Affirms Credit Ratings and Assigns National Scale Rating to 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 negative. Additionally, AM Best has assigned the Vietnam National Scale Rating (NSR) of aaa.VN (Exceptional) to PTI with a stable outlook.

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.

The negative outlooks reflect pressure on PTI's balance sheet strength fundamentals in part due to its recent capital erosion. In addition, the company's risk-adjusted capitalisation shows heightened volatility given its investments in non-rated corporate bonds.

AM Best expects that PTI's risk adjusted capitalisation, as measured by Best's Capital Adequacy Ratio (BCAR), will remain at the strongest level in the medium term. Whilst a prior capital injection plan did not materialise, the company's capital adequacy remains supportive of the current balance sheet strength assessment as its capital requirements have decreased following a significant decline in business scale in 2023. PTI's capital and surplus (including catastrophe reserves) showed a recovery from VND 1.94 trillion (USD 82.2 million) at year-end 2022 to VND 2.10 trillion (USD 86.2 million) as of 30 September 2023, through an increase in retained earnings. The majority of PTI's investments are in cash and deposits. However, the company has increased its investment in non-rated corporate bonds in recent years. Other offsetting factors to its balance sheet strength assessment include the company's elevated underwriting leverage and moderate investment risk.

PTI's operating performance is assessed as adequate as demonstrated by a five-year weighted average return-on-equity ratio of 4.7% (2018-2022). PTI reported a net loss of VND 300 billion in 2022, largely due to significant COVID-19-related claims. The company returned to profitability in the first three quarters of 2023, mainly due to its healthy net investment income. However, PTI's loss ratio over this period is estimated to be higher than its historical loss experience in the pre-pandemic years, mainly driven by deteriorating results in the health and motor lines of business. As part of the company's underwriting remediation measures, PTI has tightened its underwriting guidelines for health insurance and increased its motor premium rates. PTI's investment returns, consisting primarily of interest income, have been a relatively stable contributor to its overall earnings over the past five years.

PTI held a domestic market share of approximately 9% based on 2022 gross written premiums. The company also has a leading position in the domestic motor insurance market, supported by a wide distribution network and strong relationships with distribution partners.

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