Best’s News & Research Service - January 10, 2025 09:32 AM (EST)
AM Best Affirms Credit Ratings of Etiqa General Insurance Berhad
- January 10, 2025 09:32 AM (EST)
//BestWire// - 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). In addition, the ratings 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 2023, as measured by Best’s Capital Adequacy Ratio (BCAR), and is expected to remain at that level over the medium term. AM Best views the company as having a moderate risk investment strategy, which is made up of a combination of low-risk assets of cash, deposits and bonds, as well as higher-risk assets including equities and real estate. In addition, the company has a high dependence on reinsurance, with a net retention ratio of 34% in 2023. As a result, the company’s reinsurance recoverables are a large balance sheet item.
AM Best assesses EGIB’s operating performance as strong, supported by favourable underwriting performance and stable investment income. 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, has been the key drivers of technical profitability over recent years. In 2023, the company’s operating performance remains favourable, primarily due to better investment returns despite lower underwriting results. Although the ongoing phased liberalisation of motor and fire insurance pricing in Malaysia may constrain future underwriting margins, AM Best expects EGIB to maintain its strong operating performance over the medium term, underpinned by underwriting and pricing discipline.
AM Best views EGIB’s business profile as neutral. The company is a midsized non-life insurer in Malaysia, with a market share of approximately 10%, based on 2023 gross written premium. The company’s underwriting portfolio is diversified moderately by line of business and distribution channel, albeit with majority of business originating from Malaysia. As part of the Maybank group, EGIB benefits from good distribution capabilities with preferential access to business through its parent’s banking network. Competitive conditions in core business lines in Malaysia’s general insurance industry are expected to persist over the medium term.
AM Best views EGIB’s ERM approach as appropriate given the current size and complexity of its operations. The company’s risk management capabilities are considered appropriate relative to the profile of its key risks, although reinsurance credit/dispute risk is viewed to be elevated given EGIB’s exposure to some non-rated reinsurance counterparties.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.