KUALA LUMPUR: Fitch Ratings has affirmed the 'A-' (Strong) insurer financial strength (IFS) ratings of Etiqa group's core insurance operating entities. The outlook is stable.
The international ratings agency said on Friday the entities are Etiqa Insurance Berhad (EIB), Etiqa Takaful Berhad (ETB) and Etiqa Insurance Pte Ltd (EIPL).
“The affirmation reflects Etiqa group's established market franchise as one of Malaysia's major insurance groups, with dominant market positioning in the conventional insurance and takaful sectors.
“The affirmation also considers the group's very strong capitalisation, supported by the core operating entities' strong investment and liquidity profile and very strong profitability,” it said.
Fitch said Etiqa group's business profile as strong. EIB, ETB and EIPL are considered core subsidiaries of Maybank Ageas Holdings Bhd and hence all have been assigned the group rating.
All three entities are wholly owned by Maybank Ageas and contributed more than 90% of group total gross premiums in 2016.
“The entities share the 'Etiqa' branding and show significant coordination in their processes, management and resources.
“Fitch expects Maybank Ageas to have adequate financial and capital strength to support its core operating entities if needed,” it said.
The ratings agency also noted that in addition to the significant insurance market share in Malaysia, Etiqa also had a modest presence in Singapore as a composite insurer.
“Overall, at the group level, Maybank Ageas's absolute-size by total equity and net premiums remains smaller relative to other Fitch-rated regional insurance groups,” it said.
All three entities reported regulatory risk-based capital (RBC) ratios well above the individual target capital level (ITCL) set according to its risk profile and therefore well above the minimum regulatory benchmarks.
This was underpinned by ongoing surplus growth and sound capital management at the entity and group level.
“Maybank Ageas's score on Fitch's Prism Factor-Based Capital Model and consolidated financial leverage stood at 'Very Strong' and 14% respectively, which Fitch sees as acceptable and well within the median guidelines for Maybank Ageas's rating category.
“Fitch expects the new operating entities, following Bank Negara Malaysia's requirement for composite insurers to split their operations into separate licenses by 2018, to continue to be managed at a group level, with capital support coming from Maybank Ageas.
The three entities' investment mix and liquidity profiles remained sound in 2016.
Investments in fixed-income securities, cash and deposits accounted for more than 80% of total invested assets and exposure to risky assets, such as equities, was manageable.
Fitch expects the investment strategy to remain prudent and not to deviate significantly in the near-term.
Fitch views Etiqa group's profitability to be very strong. EIB and ETB achieved combined ratios below 100% for their general insurance businesses, and the group's bottom-line profitability, measured by pre-tax return-on-assets, improved to 3.0% (2015: 2.3%) and its return-on-equity improved to 12.4% (2015: 8.7%), helped by higher investment returns and favourable underwriting results.
Limited time offer:
Just RM5 per month.
