A.M. Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” of Energas Insurance, the sole captive of Petroliam Nasional Berhad, Malaysia’s national oil and gas company.
The outlook of the credit ratings is stable.
The ratings are reflective of Energas’ “very strong” balance sheet, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
They also factor a neutral impact from the company’s 100 percent ownership and integration with Petronas.
The ratings agency expects the risk-adjusted capitalisation, which is measured by Best’s Capital Adequacy Ratio, to remain at the strongest level over the medium term, supported by its low underwriting leverage and a conservative investment approach.
A factor partially offsetting the balance sheet is Energas’ reliance on third-party reinsurance to enable it to underwrite large limit risks and appropriately manage its aggregate exposures.
The captive has a track record of strong operating performance, with a five-year average (2013 to 2017) combined ratio below 60 percent and a return on equity ratio of 11 percent.
Underwriting performance remains subject to volatility dependent on large loss experience and arising from changes in capital expenditure and operational activity at the parent, Petronas, which drives shifts in absolute premium generation at Energas.
The low operating costs and steady stream of reinsurance commission income have contributed to the company’s overall profitability.
As the captive provides large policy limits compared with its premium income, prospective results are subject to volatility in claims experience, however, this should be moderated partially by the Energas’ comprehensive reinsurance programme.
A.M. Best noted that Energas “is well-integrated within the Petronas group’s risk management framework and has an active role in overseeing and containing the group’s insurance costs” and “has a developed ERM framework, with clear risk appetite and tolerance levels in place”.
