SINGAPORE--(BUSINESS WIRE)--#insurance--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of �a-� (Excellent) of Etiqa General Insurance Berhad (EGIB) (Malaysia). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect EGIB�s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also factor in a neutral impact from the company�s ultimate majority ownership by Malayan Banking Berhad (Maybank group), one of the largest financial services groups incorporated, listed and domiciled in Malaysia.
EGIB�s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year end 2021, as measured by Best�s Capital Adequacy Ratio (BCAR), and is expected to remain at this level over the near to medium term. AM Best views the company as having a moderate-risk investment strategy as it holds a combination of low-risk assets, including cash, deposits and bonds, albeit with notable exposure to higher-risk assets of equities and real estate (together representing approximately 23% of invested assets at year end 2021). In addition, the company has high reinsurance usage and dependence, with a net retention ratio of 33% in 2021. As a result, the company�s reinsurance recoverables are a large balance sheet item, equal to three times its shareholders� equity at the end of 2021.
EGIB�s operating performance is assessed as strong, with a five-year average combined ratio of approximately 87% (2017-2021). During the year-to-date period ending 30 June 2022, the company reported a combined ratio of approximately 81%. Low net loss experience in the company�s core business lines of fire and personal accident, as well as favourable reinsurance commission income from ceded risks, have been the key drivers of technical profitability over recent years. Overall earnings have been supported by favourable underwriting performance and consistent investment income. Prospectively, the phased liberalisation of motor and fire insurance business in Malaysia may increase competition and depress market pricing. However, EGIB�s advances in pricing and risk selection, distribution and product design are expected to support its continued strong operating performance.
The business profile assessment of neutral reflects EGIB�s position as the fifth largest general insurer in Malaysia with a market share of over 8%, based on 2021 gross direct written premium. The company�s underwriting portfolio is diversified moderately by line of business and distribution channel, albeit with all business originating from Malaysia.
AM Best views EGIB�s ERM approach as appropriate given the current size and complexity of its operations. Risk management capabilities are typically considered appropriate relative to the profile of the company�s key risks, although reinsurance credit/dispute risk is viewed to be elevated given the company�s exposure to some non-rated reinsurance counterparties, including captives.
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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