Fitch affirms M’sian Re IFS ‘A’ rating, with stable outlook
Published on: Tuesday, January 25, 2022
By: Bernama
.jpg "Fitch affirms M’sian Re IFS ‘A’ rating, with stable outlook")
Kuala Lumpur: Fitch Ratings has affirmed Malaysian Reinsurance Bhd’s (Malaysian Re) Insurer Financial Strength (IFS) Rating at ‘A’ (Strong), with a stable outlook.The affirmation reflects the company’s very strong capital buffer and sustained financial performance, and takes into consideration its ‘moderate’ company profile and challenges in managing potential volatility in underwriting performance, especially from its overseas business, the credit rating agency said.
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It noted that Malaysian Re’s regulatory risk-based capital (RBC) ratio was well above the regulatory minimum of 130 per cent in the financial year ended March 2021 (FY21), as well as at end-September 2021, and its score on Fitch’s Prism Factor-Based Model was well into ‘strong’.
Hence, Fitch Ratings believes that Malaysian RE will continue to maintain its capital buffer to combat volatilities in its underwriting performance.
‘’The combined ratio was 99 per cent in FY21, with a three-year average of 99 per cent. We estimate this ratio at approximately 99 per cent for the first half of FY22.
‘’The company is sustaining its profitability by continuing to adopt selective underwriting, and monitoring the underwriting results of its portfolio to weed out unprofitable accounts,’’ it said in a statement.
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Fitch Ratings added that Malaysian RE plans to enhance its overseas business gradually while reducing dependence on domestic business for growth.
Malaysia contributed about 58 per cent of the reinsurer’s total net written premiums in FY21, and remains its main market.
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“The remaining premium income comes from a variety of offshore markets in Asia, Europe and the Middle East,” it said. Fitch Ratings estimates its ‘risky-assets’ ratio and sovereign investment-to-capital ratio to be below 50 per cent at FY21 and the first half of FY22.
As such, the agency has scored Malaysian Re’s company profile at ‘bbb+’ under its credit-factor scoring guidelines.
It added that Malaysian Re had a more than 50 per cent share in Malaysia by reinsurance accepted premiums in FY21.
Fitch Ratings also expects the company’s market franchise to be sustainable, underpinned by its strong branding and continued support from local cedants as part of a regulated cession arrangement which was renewed for another three years up to Dec 31, 2024.
“The reinsurer also participates in various local industry initiatives to strengthen its business relationships with cedants,” it added.
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