Published on 08 Feb 2021.
RAM Ratings has reaffirmed MNRB Holdings Berhad’s (MNRB or the Group) and Malaysian Reinsurance Berhad’s (Malaysian Re or the Reinsurer) ratings, as outlined in Table 1. The one-notch difference between MNRB’s senior debt issue rating and Malaysian Re’s AA2 long-term insurer financial strength rating reflects the former’s structural subordination as a non-operating holding company and its moderate debt load at the holding-company level.
Our rating action reflects MNRB’s dominant position in the domestic general reinsurance industry, where its primary subsidiary – Malaysian Re – had retained a significant share (66%) of the industry’s gross reinsurance premiums in 2019. Its well-established franchise in the domestic market is supported by regulatory voluntary cession (VC) arrangements and the Reinsurer’s long-standing relationships with local cedants. The ratings also consider the Group’s subsidiaries’ healthy capitalisation and strong reserves coverage, although its volatile underwriting performance counterbalances these strengths.
MNRB’s credit profile hinges on Malaysian Re’s given that the latter is the largest contributor to the Group’s earnings. Apart from reinsurance, the Group also participates in the domestic general takaful and family takaful segments through subsidiaries Takaful Ikhlas General Berhad (IKHLAS General) and Takaful Ikhlas Family Berhad (IKHLAS Family) although these businesses are relatively small in terms of their earnings contribution to MNRB, as well as in their respective takaful segments. IKHLAS General has a 10.0% share of the general takaful segment’s gross contributions while IKHLAS Family contributed just 4.5% of the family takaful segment’s annual contribution equivalent in 2019.
Malaysian Re drove much of the Group’s earnings improvements in FY Mar 2020 and 1H FY Mar 2021, as the latter’s pre-tax profits soared to a respective RM150.9 mil and RM105.2 mil (fiscal 2019: RM119.4 mil; 1H fiscal 2020: RM99.1 mil) following a rebound in growth in the Reinsurer’s overseas portfolio. While Malaysian Re does not expect a substantial increase in claims arising from the pandemic due to limitations on claims for infectious and contagious diseases (ICD), the Reinsurer had nonetheless made a conservative assessment and set aside RM18.9 mil for potential Covid-19 related claims in 1H fiscal 2021.
The capital adequacy ratios of the Group’s main subsidiaries remained comfortably above their individual target capital levels and the regulatory minimum of 130% as at end-September 2020. At the company level, MNRB’s gearing and double leverage ratios remained well within their rating thresholds at a respective of 0.3 time and 1.1 times as at end-September 2020 (end-March 2019: 0.3 time and 1.3 times).
MNRB Holdings Berhad
Malaysian Reinsurance Berhad
Loh Kit Yoong
(603) 3385 2493
(603) 3385 2577
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Rating Rationale: MNRB Holdings Berhad
Rating Rationale: Malaysian Reinsurance Berhad
Ratings on MNRB Holdings Berhad