RAM reaffirms Malaysian Reinsurance Berhad’s AA2/ Stable/P1 ratings

KUALA LUMPUR: RAM Ratings has reaffirmed the AA2/Stable/P1 insurer financial strength (IFS) ratings of Malaysian Reinsurance Bhd (Malaysian Re).

Concurrently, it also reaffirmed the AA3/Stable rating of the reinsurer’s RM250 million Subordinated MTN Programme (2015/2030). Securities issued under the MTN Programme are rated 1 notch below the Reinsurer’s long-term IFS rating to reflect their status as an unsecured and subordinated obligation of the Reinsurer.

“The reaffirmation of the ratings reflects Malaysian Re’s improved year-on-year financial performance, its portfolio optimisation initiatives and the extension of voluntary cession (VC) arrangements until December 2019, which are expected to contribute to earnings stability over the intermediate term,” it said in a statement yesterday.

“Additionally, its reserves, liquidity and capitalisation position remain supportive of its ratings.

“The reinsurer recorded a healthier pre-tax profit of RM100.4 million in the financial year ending March 2017 (FY17) on the back of narrower underwriting losses and higher investment income amid improved market conditions.”

Specifically, Malaysian Re’s FY17 gross premiums of RM1.3 billion were six per cent lower year on year (y-o-y) given its portfolio rebalancing, which involves exiting unprofitable markets and business lines.

“The continuation of VC arrangements – under which local general insurers are required to cede a percentage of their business to Malaysian Re – provides a stable base for domestic earnings growth, although future premium increases will largely depend on overseas business traction,” it opined.

“In terms of claim experience, the reinsurer’s domestic business saw an improved loss rate on account of lower large and attritional losses, compared to the year before.”

RAM forewarned that its overseas portfolio, however, was more volatile and remained a drag to Malaysian Re’s ts underwriting performance.

“Although there were reduced catastrophic losses in FY17, the reinforcement of reserves for prior-year claims had caused the segment’s combined ratio to rise to 140 per cent during the period.