RAM Ratings has reaffirmed the AAA/stable/P1 claims-paying ability ratings of Etiqa Insurance Berhad (EIB). At the same time, RAM has reaffirmed the AA1/stable rating of EIB’s $154.2 million subordinated bonds, valid until 2023.
EIB ranks among the top 5 life and general insurance companies in Malaysia, and is able to leverage on the network of its ultimate parent, Malayan Banking Berhad for a steady flow of captive business and bancasurance.
The low-cost distribution structure, coupled with prudent underwriting standards, afforded EIB healthy profitability, while its consolidated three-year pre-tax profit margin and ROA stood at 25.3 percent and 3.0 percent, respectively.
EIB’s capital-adequacy ratio (CAR) stood at 282 percent as at December 2013. The ratings also considered EIB’s sturdy reserves and fund surplus to buffer insurance liabilities as well as the company’s strong liquidity and conservative investment mix.
Moderating these strengths are EIB’s higher-than-industry motor claims and the predominance of single premium investment-linked (IL) policies. Income from IL products is viewed to be less sustainable as their demand is linked to the stock market’s performance. EIB’s IL business slowed in December 2013 amid moderating demand.
According to RAM, potential pressure on EIB’s ratings could arise from persistent deterioration in its overall financial metrics, including weak new business growth, combined ratio above 105 percent, CAR falling below 200 percent and weakening reserves.
