RAM Ratings reaffirms AA3 and A1 ratings of MNRB Holdings’ Senior and Subordinated Sukuk

Published on 07 Feb 2020.

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RAM Ratings has reaffirmed the respective AA3/Stable and A1/Stable ratings of the Senior and Subordinated Sukuk under MNRB Holdings Berhad’s (MNRB or the Group) RM320 million Sukuk Murabahah Programme. The reaffirmation of the ratings reflects the AA2/Stable/P1 insurer financial strength ratings of MNRB’s core subsidiary, Malaysian Reinsurance Berhad (Malaysian Re), and the subordination of the Group’s creditors to the policyholders and creditors of its operating subsidiaries. The ratings also consider MNRB’s improved gearing and double leverage ratios which remain well within its rating thresholds. The one-notch differential between the ratings of the Senior and Subordinated Sukuk is indicative of the latter’s subordination in the right to payments and claims. 

MNRB is a non-operating holding company with general reinsurance and retakaful, family retakaful, general takaful and family takaful businesses in Malaysia. In addition to its ownership of Malaysian Re, MNRB also holds 100% stakes in Takaful Ikhlas General Berhad (IKHLAS General) and Takaful Ikhlas Family Berhad (IKHLAS Family). The Group’s established market position is anchored by Malaysian Re, the national general reinsurer whose dominant market position is supported by voluntary cession arrangements and long-standing relationships with local cedants. The Group’s general and family takaful businesses are relatively smaller. 

Following a RM400 mil rights issue in 2018, MNRB’s gearing and double leverage ratios had moderated to 0.3 times and 1.3 times, respectively, as at end-March 2019 (end-March 2018: 0.5 times and 1.4 times). These indicators are expected to ease further in view of the establishment of a dividend reinvestment plan which allows the Group greater flexibility vis-à-vis capital management and meeting the return targets of its main shareholder, Permodalan Nasional Berhad (PNB) and the funds managed by PNB. MNRB’s liquidity and debt servicing ability are also anticipated to improve, owing to a dividend utilisation plan which balances its commitment to shareholders and the need to maintain internal cash reserves. 

Although the Group benefits from earnings diversification given its reinsurance and takaful businesses, earnings volatility had in the past constrained the ability of MNRB’s subsidiaries to upstream dividends. In FY Mar 2019, the Group’s gross premiums declined 11% to RM2.0 bil due to portfolio rationalisation initiatives at Malaysian Re and reduced new business contributions from IKHLAS Family. The weaker performances of both segments had also caused the Group’s pre-tax profit to contract by 38% to RM119 mil. A better investment performance in 1H FY Mar 2020 had contributed to an improved pre-tax profit of RM99 mil (1H FY Mar 2019: RM67 mil). The Group’s projections include more stable dividend income, albeit subject to the performance of its subsidiaries. 

The capital adequacy ratios of the Group’s subsidiaries are supportive of growth in the near to middle term, with no further capital injections from MNRB expected. MNRB had received dividend income of RM40 mil in FY Mar 2020, with RM35 mil streamed up from Malaysian Re and the balance from IKHLAS General. Malaysian Re is expected to remain MNRB’s main dividend contributor over the near to medium term.


Analytical contact
Ann Kimberly Lee 
(603) 3385 2533

Media contact
Padthma Subbiah
(603) 3385 2577


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

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