Published on 16 April 2014
RAM Ratings has reaffirmed the
AAA/stable/P1 claims-paying ability ratings of Etiqa Insurance Berhad (EIB or
the Company). At the same time, we have reaffirmed the AA1/stable rating of
EIB’s RM500 million Subordinated Bonds (2013/2023).
EIB ranks among the top 5 life
and general insurance companies in Malaysia. The Company is able to leverage on
the vast network of its ultimate parent, Malayan Banking Berhad (Maybank –
rated AAA/stable/P1 by RAM) for steady captive business and bancasurance. The
low-cost distribution structure, coupled with prudent underwriting standards,
afford EIB healthy profitability; its consolidated 3-year pre-tax profit margin
and ROA stood at a favourable 25.3% and 3.0%, respectively. This consistent
financial performance underpins EIB’s exceptional capitalisation; its
capital-adequacy ratio (CAR) stood at 282% as at end-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
the Company’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 FY Dec 2013 amid moderating demand.
The Company’s strategy is to shift its focus to grow regular premium, in a bid
to boost persistency; fiscal 2013 registered a small 6% y-o-y increase in
regular premium.
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%, CAR
falling below 200% and weakening reserves.
Media contact
Jocelyn Chiang
(603) 7628 1124
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