Ratings Roundup: Malayan Insurance, China Taiping, Energas

April 3, 2014

A.M. Best has affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb+” of the Philippines-based Malayan Insurance Co., Inc. (MICO), both with stable outlooks. The ratings reflect MICO’s “solid risk-adjusted capitalization, prominent business profile in the Philippine non-life insurance market and its consistently favorable investment performance,” Best explained. “MICO’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains solid, despite the company’s losses from the several catastrophe events that occurred in the Philippines in 2013 and the Thailand flooding in 2011.” The report also notes that “with over 80 years of operation, MICO has established a strong brand name in the Philippines. The company has maintained the largest non-life insurer position in the Philippines in terms of direct premium written for over four decades. The investment portfolio has been an important income source to MICO, as the company has consistently posted satisfactory investment results to offset the underwriting deficit and deliver a net profit every year in the past five years. It is expected that investment activities will continue to make a significant contribution to the company’s bottom line going forward.” As an offsetting factor Best noted “MICO’s unfavorable underwriting performance, primarily due to its high operating expenses relative to regional peers. In recent years, the company’s underwriting results were also impacted by losses from the frequent catastrophe events that occurred in the Philippines and the Asia Pacific region. In conclusion Best said: “Future upward rating actions could occur if MICO can demonstrate a significant improvement in its underwriting performance through more stringent risk selection, improved pricing adequacy and higher operational efficiency. Conversely, downward rating actions could occur if the company’s risk-adjusted capitalization declines materially as a result of the poor underwriting performance or a decline in its invested asset value.”

A.M. Best has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a” of China Taiping Insurance (Macau) Co., Ltd. (CTIM, both with stable outlooks. The rating affirmations “recognize CTIM’s sound risk-adjusted capitalization, consistently favorable underwriting results and strong business profile in the Macau non-life market,” Best said. “CTIM has demonstrated a favorable track record of profitable operating results over the past few years. The performance was mainly driven by the continued improvement in the underwriting profits, which reflected the company’s strengthened underwriting risk selection and pricing capability as a result of its leading market position in Macau. In addition, CTIM’s investment portfolio contributed good liquidity and profitable overall investment earnings over the past few years. Going forward, it is expected that CTIM’s positive retained earnings, albeit with a relatively high dividends payout ratio, will gradually improve its risk-adjusted capitalization.” As partial offsetting factors Best cited the “drag on the underwriting profits due to the consistently high combined ratio in the motor line and the relatively high volatility in the investment earnings due to fluctuations in the unrealized values of equity securities and unit trust funds.” In conclusion Best said: “While positive rating actions are unlikely in the short term, negative rating pressure could arise if CTIM’s risk-adjusted capitalization and/or operating results were to materially deteriorate.”

A.M. Best has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a” of Malaysian insurer Energas Insurance (L) Limited, both with stable outlooks. Best said the “rating affirmations reflect the company’s strong risk-adjusted capitalization, continuing favorable operating performance and comprehensive reinsurance program. The ratings also acknowledge its strategic position as the sole captive insurance company for Petroliam Nasional Berhad (Petronas), the national oil and gas company of Malaysia, which is wholly owned by the Government of Malaysia. Energas’ role is an integral component in the overall risk management program of the group.” Best also noted that “Energas’ capital and surplus has been growing steadily in the past five years due to its favorable underwriting results. The company’s financial strength is further underpinned by its retention of earnings, risk selection and reinsurance program. In addition, Energas has maintained a prudent investment portfolio of high liquidity. Energas maintains a comprehensive reinsurance program with a strong panel of reinsurers, which is expected to continue to protect its capitalization in the event of large losses.” As a partial offsetting factor Best cited “Energas’ potential volatility of underwriting performance and capitalization due to its captive business nature and higher risk retention since 2013. Best’s report concludes that “Energas is well positioned at its current rating level. Negative rating actions could occur if there is material deterioration in operating performance, resulting in a material decline in its risk-adjusted capitalization level. Alternatively, negative rating pressure might arise if there is a significant downward movement of Petronas’s credit profile.”

Add a Comment

Your email address will not be published. Required fields are marked *


More News
More News Features