Malayan Insurance, the biggest non-life insurer in the Philippines, has a five-year average combined ratio and return-on-equity ratio of 101.4% and 4.1% (2017-2021), respectively, notes AM Best.
The international credit rating agency views Malayan’s operating performance as adequate. Overall underwriting performance has been hampered by volatility and unfavourable loss experience from its fire business in recent years, driven by catastrophe and large loss events. Nevertheless, the company continues to report good technical results for its motor business, which helps to offset the unfavourable performance of its fire business. Investment income, which is composed of interest and dividend income, continues to be the principal contributor to Malayan’s overall earnings.
AM Best has affirmed Malayan's Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good). The outlook of these credit ratings is 'Stable'.
These ratings reflect Malayan’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. In addition, the ratings factor in a neutral impact from the company’s ultimate ownership by Pan Malayan Management and Investment Corp.
Malayan’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which is expected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). Notwithstanding this, the company’s capital adequacy remains sensitive to catastrophe-stressed scenarios emanating from flood, typhoon and earthquake events in the Philippines.
The company’s high reliance on reinsurance to enable the underwriting of catastrophe and large property risks remains a partially offsetting factor, along with its exposure to counterparties that are non-rated on an international financial strength rating scale.
Malayan’s balance sheet strength also remains exposed to notable market and concentration risk arising from its sizeable equity investments. However, the company has made progress in reducing these risks through ongoing reductions in its equity investment exposure.
The 'Neutral' business profile assessment reflects the company’s position as the largest non-life insurance company in the Philippines based on gross premium written in 2021. Malayan also benefits from its affiliation with the Yuchengco Group of Companies, a large conglomerate in the Philippines, in terms of branding and distribution. Malayan demonstrates strong commitment toward digital transformation, which is an important pillar of the company’s long-term strategy for retail business development.