(The following statement was released by the rating agency)
HONG KONG, April 30 (Fitch) Fitch Ratings has affirmed
Insurance Berhad's (EIB) Insurer Financial Strength (IFS) rating
at 'A' with
KEY RATING DRIVERS
The rating reflects EIB's solid capital strength, favorable
and sound liquidity. The rating also considers the company's
distribution coverage and its strategic status as one of the
subsidiaries within Maybank Ageas Holdings Berhad (MAHB), a
group in Malaysia.
EIB's capitalisation remained strong despite a dividend payout
of RM450.2m to
MAHB in 2013. Slower premium growth along with the issuance of
subordinated bonds, which can be recognised as part of Tier 2
the company's statutory risk-based capital (RBC) ratio from 225%
at end-2012 to
282% at end-2013, well in excess of the regulatory minimum of
130%. In view of
the company's ongoing surplus growth, Fitch believes that EIB is
keeping adequate capital buffer to support its premium
EIB further strengthened the underwriting profitability of its
portfolio in 2013. The company's overall loss ratio decreased to
55.5% in 2013
from 57.6% in 2012 partly due to a reduction in its exposure to
Gross written premiums from motor insurance declined by 6.1% in
it still amounted to about 47.5% of its total net written
The agency believes the underwriting results of EIB's motor
will continue to be constrained by the market-wide adverse claim
third-party bodily injury and death (TPBID) motor insurance in
the near term,
notwithstanding permission granted by Bank Negara Malaysia to
insurers to make
gradual adjustments on motor insurance tariff rates.
Nonetheless, Fitch expects EIB's overall underwriting result to
profitable in the near term, given the company's disciplined
strategy and its initiative to further expand in fire insurance,
generally more profitable than motor insurance in Malaysia.
reinsurance protection, EIB estimates potential claims
associated with the
disappearance of Malaysia Airlines Flight MH370 is likely to be
Fitch will closely monitor developments in this incident and
evaluate its impact
on the company's financial position.
EIB recorded a 25% drop in gross premiums written from life
funds in 2013 as the
company put less emphasis on the sales of single premiums
believes that the growth prospects of EIB's life portfolio
remain positive in
the mid to long term given the company's wide agency network
across Malaysia and
its bancassurance partnership with Malayan Banking Berhad.
The liquidity position of EIB's shareholder and general
insurance funds remains
strong. Liquid assets (including structured deposits) were about
2.83x the net
technical reserves for its general insurance fund at end-2013.
With its existing
investment approach, the company is likely to maintain good
liquidity to support
the claims liabilities of its general insurance fund.
Key rating triggers that could result in a downgrade include
- a decrease in EIB's statutory RBC ratio to below 200% on a
- an increase in MAHB's financial leverage on a consolidated
basis to more than
30% (end-2013: 10%),
- a deterioration in the company's general insurance's
underwriting margin with
a combined ratio consistently above 105%, or
- a sharp decline in lapse rates and mortality profit.
An upgrade is unlikely in the near term as EIB's IFS rating is
at the same level
as Malaysia's Local-Currency IDR of 'A', which is on Negative
downgrade of Malaysia's 'A' Local-Currency IDR by more than one
likely result in a rating downgrade for EIB's IFS rating.
of adverse change in EIB's financial metrics due to a rougher
environment associated with a weakening sovereign rating could
also lead Fitch
to reassess the one-notch differential between the insurer's
rating and the
sovereign's Local Currency IDR.
+852 2263 9920
Fitch (Hong Kong) Limited
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+852 2263 9920
+44 20 3530 1168
Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935,
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Insurance Rating Methodology', dated 13
November 2013, are
available on www.fitchratings.com.
Applicable Criteria and Related Research:
Insurance Rating Methodology
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