SINGAPORE–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” of Malayan Insurance Co., Inc. (Malayan) (Philippines). The outlook of the FSR remains stable, whilst the outlook of the Long-Term ICR remains negative.
The ratings reflect Malayan’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The company’s balance sheet strength is supported by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which remains at a very strong level. Capital adequacy is underpinned by Malayan’s low net underwriting leverage and a panel of reinsurers of high credit quality. However, an offsetting factor is the company’s exposure to equity investments, which remains relatively sizable compared with Malayan’s total invested assets and capital base. In addition, as the company underwrites large and complex risks, its balance sheet is exposed to credit risk arising from a considerable volume of reinsurance recoverables, which continues to place pressure on its risk-adjusted capitalisation.
AM Best views Malayan’s operating performance as adequate given its track record of operating profitability, which has been supported primarily by interest and dividend income. Underwriting activities have been loss-making, however, over recent years as a result of unfavourable performance in the fire and engineering, coupled with impacts from multiple catastrophe losses. The company recorded a five-year average combined ratio (2014-2018) of 102%. Furthermore, based on draft financial statements, AM Best expects the company to report a combined ratio slightly above 100% for 2019. To improve its underwriting performance, Malayan has been shifting its growth focus to the highly retainable and more profitable segments such as motor, personal accident and general liability, while reducing the net retained risks of fire and engineering classes of business. However, the growth of targeted retail business has lagged behind the company’s projections and is expected to be affected negatively by COVID-19-related economic slowdown in 2020.
Malayan is the largest non-life insurer in the Philippines based on gross premium written, with a market share of above 10%. The company benefits from its strong brand name and affiliation with the Yuchengco group of companies, which is one of the largest conglomerates in the Philippines.
AM Best considers Malayan’s ERM as appropriate given the current size and complexity of the company’s operations. Malayan continues to develop and enhance its ERM framework with an emphasis on comprehensive risk monitoring and assessment activities.
The negative outlook of the Long-Term ICR reflects AM Best’s expectation of a continuously challenging operating environment for Malayan’s property business, and the potential volatility of the equity market, which may impact the company’s risk-adjusted capitalisation and operating performance over the near to medium term.
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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Tran Nhat Trung
+65 6303 5019
Manager, Public Relations
+1 908 439 2200, ext. 5159
+65 6303 5024
Director, Public Relations
+1 908 439 2200, ext. 5644