Malayan gets stable credit rating outlook

MANILA, Philippines — AM Best has revised the Long-term Issuer Credit Rating (Long-term ICR) outlook to stable from negative, and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of Malayan Insurance Co., Inc. The outlook of the FSR is stable.

The credit ratings, according to businesswire.com, reflect Malayan’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile, and appropriate enterprise risk management. In addition, the ratings factor in a neutral impact from the company’s ultimate ownership by Pan Malayan Management and Investment Corp.

The revision of the Long-term ICR outlook to stable from negative follows an improvement in the company’s risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR). Prospectively, Malayan’s risk-adjusted capitalization is expected to remain at the strongest level and exhibit less volatility as a result of recent and ongoing reductions in its equity investment exposure.

Partially offsetting balance sheet factors include the company’s high reliance on reinsurance to enable the underwriting of large property risks, as well as its exposure to counterparties that are non-rated on an international FSR scale. The company’s balance sheet strength also remains sensitive to severe natural catastrophe events, albeit this risk is mitigated in part through reinsurance.

AM Best assesses Malayan’s operating performance as adequate. The company has reported a five-year average combined ratio and return-on-equity ratio of 99.9 percent and 4.6 percent, respectively (2016-2020). Overall underwriting performance has been hampered by volatility and unfavorable loss experience from its fire business over recent years, driven by catastrophe and large loss events. Nevertheless, the company continues to report good technical results for its motor business, which helps offset the unfavorable performance of its fire business. Investment income, which is comprised of interest and dividend income, continues to be the principal contributor to Malayan’s overall earnings.

The business profile assessment of neutral reflects the company’s position as the largest non-life insurance company in the Philippines based on gross premium written in 2020. Malayan also benefits from its affiliation with the Yuchengco Group of Companies, a large conglomerate in the Philippines, in terms of branding and distribution. Malayan demonstrates strong commitment towards digital transformation, which is an important pillar of the company’s long-term strategy for retail business development.