AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb” (Good) from “bbb+” (Good), as well as affirmed the Financial Strength Rating of B++ (Good) and assigned the Philippines National Scale Rating (NSR) of aa+.PH (Superior) to Malayan Insurance Co., Inc (Malayan) (Philippines). The outlook of these Credit Ratings (ratings) is stable.
These ratings reflect Malayan’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. In addition, the ratings factor in the neutral impact from the company’s ultimate owner, Pan Malayan Management and Investment Corp.
The downgrade of the Long-Term ICR reflects Malayan’s weakened balance sheet strength fundamentals. The company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), has weakened in recent years due to heightened credit risk following recent catastrophe events. Prospective capital adequacy is expected to remain under negative pressure with the increase in its net retention and the company’s heightened sensitivity to natural catastrophes following changes to its reinsurance programme in 2023. Additionally, Malayan maintains an elevated exposure to counterparties that are non-rated on an international credit rating scale. Malayan’s balance sheet strength also remains exposed to notable investment risk arising from its sizable equity investments; however, the company has made ongoing progress to de-risk its investment portfolio in recent years.
AM Best views Malayan’s operating performance as adequate. The company reported a five-year average combined ratio and return-on-equity ratio of 102.8% and 3.8% (2018-2022), respectively. Overall underwriting performance has exhibited moderate volatility, driven by catastrophe and large loss events, which negatively impacted the company’s fire and engineering lines in 2022. Nevertheless, good technical results for its motor business have helped to partially mitigate the deterioration in underwriting results. Investment income continues to be the principal contributor to Malayan’s overall earnings. AM Best expects prospective underwriting performance to be supported by ongoing portfolio remediation measures, as well as business growth in more profitable retail segments.
The business profile assessment of neutral reflects Malayan’s position as the largest non-life insurance company in the Philippines based on gross premium written in 2022. The company benefits from its affiliation with the Yuchengco Group of Companies, a large conglomerate in the Philippines, in terms of branding and distribution. Malayan continues to demonstrate a strong commitment toward digital transformation, which is an important pillar of its long-term strategy for retail business development.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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Xin Ya Ong
Associate Financial Analyst
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Associate Director, Public Relations
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Chris Lim, FCII, CFA
Associate Director, Analytics
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Senior Public Relations Specialist
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