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RAM Ratings affirms MNRB
Published on 05 Feb 2024.
RAM Ratings has affirmed the ratings of MNRB Holdings Berhad (MNRB or the Group) and Malaysian Reinsurance Berhad (Malaysian Re), as listed in Table 1.
Our rating action considers Malaysian Re’s strong market position in the domestic general reinsurance space and the adequate capitalisation of MNRB’s key operating subsidiaries. MNRB’s ratings also incorporate the subordination of its creditors to the policyholders and creditors of its regulated operating entities, as well as moderate leverage at the holding company level. MNRB’s gearing and double leverage ratios were unchanged and stayed well below the rating limits at 0.3 times and 1.1 times, respectively, as at end-September 2023.
Despite profit improvement in recent years in tandem with the growth traction of its subsidiaries, the Group is subject to some degree of earnings variability in view of the susceptibility of its reinsurance unit to large claims and, to a lesser extent, the ability of the takaful units to sustain their growth momentum. Aided by stronger premiums from all subsidiaries and better investment returns, MNRB reported a higher pre-tax profit of RM151.0 mil in FY Mar 2023 (+18% y-o-y; FY Mar 2022: RM127.5 mil), which would have been more significant if not for heftier claims and expenses. Pre-tax profit subsequently came in at RM135.9 mil in 1H fiscal 2024 (1H fiscal 2023: loss of RM1.0 mil), predominantly on the back of a recovery in investment and underwriting performance.
The capital adequacy ratios of the Group and its key operating subsidiaries as at end-September 2023 stayed above their respective individual target capital levels and the regulatory minimum of 130%. These levels are envisaged to be supportive of the subsidiaries’ growth plans in the near to medium term.
Like other domestic insurance players, MNRB and Malaysian Re adopted Malaysian Financial Reporting Standard 17 for insurance contracts in 2023. Although limited disclosure of its 1H 2023 financials constrains our analysis, we do not expect the credit fundamentals of the Group and the Reinsurer to be materially affected by the new accounting standard (see RAM’s Updates on Disclosure Formats and Financial Measures of Insurance Companies for details).
Table 1: Ratings of MNRB and Malaysian Re
Note: The subordinated notes issued under Malaysian Re’s bond programmes are rated one notch below its long-term insurer financial strength
rating to reflect their status as unsecured and subordinated obligations of the reinsurer.
Analytical contacts
Loh Kit Yoong
(603) 3385 2493
kityoong@ram.com.my
Sophia Lee
(603) 3385 2619
sophia@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
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 2024 by RAM Rating Services Berhad
