Danajamin’s insurer financial strength ratings reaffirmed

PETALING JAYA: RAM Ratings has reaffirmed Danajamin Nasional Bhd’s insurer financial strength (IFS) ratings at AAA/Stable/P1.

The rating agency said in a statement that it also reaffirmed the respective AAA/Stable and AA1/Stable ratings of the Senior and Subordinated Sukuk under Danajamin’s Sukuk Murabahah Programme of up to RM2 billion.

RAM said the ratings reflect its view that the company will continue to benefit from extraordinary support from the government, given its confidencesensitive role as the national financial guarantee insurer.

Jointly owned by the Minister of Finance Inc and Bank Negara Malaysia via Credit Guarantee Corp Malaysia Bhd, Danajamin is mandated to stimulate and deepen the domestic bond and sukuk market.

Reflective of the government’s commitment, RAM noted that Danajamin has access to RM1 billion of capital on call, in addition to RM1 billion in paid-up capital.

Additionally, RAM said the ratings also reflect Danajamin’s robust capitalisation, strong liquidity and leverage, which has remained comfortably within RAM’s limit for its ratings.

As at end-March 2018, Danajamin’s leverage ratio stood at 3.0 times.

RAM further added that supported by the issuance of Subordinated Sukuk, Danajamin’s capital adequacy ratio exceeded 400% at the same date, well above the regulatory requirement of 130%.

Danajamin’s liquid assets stood at RM1.8 billion or 4.2 times its net insurance contract liabilities as at end-March 2018, providing adequate buffer to meet any liquidity needs from potential claims, it added.

With three new issuances in fiscal 2017, RAM said Danajamin’s guarantee portfolio grew to RM6.1 billion as at endDecember 2017 from RM5.7 billion a year ago.

Notwithstanding higher gross written premiums and investment income, its pre-tax profit was a lower RM114.2 million (fiscal 2016: RM125.5 million), due mainly to timing adjustments of premium recognition and financing cost.

RAM said that large scheduled redemptions and the smaller size of recent deals may limit significant portfolio growth going forward.

It said negative rating triggers include a reduced likelihood of extraordinary support from the government, adverse claims and significant deterioration in leverage and regulatory capital.

“Danajamin’s inability to achieve meaningful growth of its insured portfolio and underwriting premiums over the medium to long term would also put pressure on the ratings,” it added.