RAM Ratings assigns AA2 and AA3 ratings to Malaysian Re’s proposed RM800 mil senior and subordinated notes

Published on 07 Sep 2022.

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RAM Ratings has assigned respective AA2/Stable and AA3/Stable ratings to the senior and subordinates notes under Malaysian Reinsurance Berhad’s (Malaysian Re or the Reinsurer) proposed RM800 million Medium-Term Notes (MTN) Programme. Concurrently, we have reaffirmed Malaysian Re’s insurer financial strength ratings of AA2/Stable/P1 and the AA3/Stable ratings of its RM250 million Subordinated MTN Programme (2015/2030).

Malaysian Re’s credit metrics have stayed largely intact since our previous review in February 2022. The Reinsurer remained focused on diversifying its revenue by growing non-voluntary cession (VC) portfolios, recording strong premium growth of 22% in FY Mar 2022 (FY Mar 2021: +10%). The uptick was driven mainly by overseas business. Although a smaller growth driver, Malaysian Re’s domestic portfolio continued to account for the lion’s share of the domestic general reinsurance industry’s gross premiums in 2021 (64%; 2019-2021: 60%-70%).

Given the nature of its business, Malaysian Re’s underwriting and profit performance tends to fluctuate according to the incidence and severity of loss events in a year. Despite the improved top line, heftier claims – including large losses from flood events in Malaysia and several European countries – and higher commission expenses resulted in an underwriting loss of RM30.8 mil in fiscal 2022 (fiscal 2021: surplus of RM11.6 mil). This translates into a combined ratio of 102%, up slightly from the three-year average of 101%. The weaker underwriting performance and to a lesser extent, dampened investment valuations, caused a sharp decline in the Reinsurer’s pre-tax profit (fiscal 2022: RM71.0 mil; fiscal 2021: RM144.2 mil). 

Malaysian Re’s capital adequacy ratio (CAR) remained comfortably above the 130% regulatory minimum and its individual target capital level (ITCL) as at end-March 2022. As the Reinsurer is expected to maintain a level of capital commensurate with its risk profile, we derive some comfort from its internal policy which requires the post-dividend CAR to be at least 15 percentage points above the ITCL. Malaysian Re will tap the proposed MTN programme to fund business growth, which would raise its debt load to RM251 mil by end-March 2023 (end-March 2022: RM51 mil). The Reinsurer’s financial leverage would be higher at 12% (end-March 2022: 2.7%), which is manageable in our view.


Analytical contacts
Loh Kit Yoong
(603) 3385 2493

Sophia Lee
(603) 3385 2619


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.

Published by RAM Rating Services Berhad
© Copyright 2022 by RAM Rating Services Berhad

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