The operating performance of Malayan Insurance, one of the top three non-life insurers in the Philippines in terms of GWP and net income, is viewed as adequate, said AM Best.
The company reported a five-year average return-on-equity ratio of 3.8% (2019-2023). While total operating earnings remained profitable in 2023, the company reported an underwriting loss, in part due to lower reinsurance commission income.
Overall underwriting performance has exhibited moderate volatility in recent years, driven by CAT and large loss events, which negatively impacted Malayan’s core commercial lines. Nevertheless, good technical results for its motor business continue to help to partially mitigate the deterioration in underwriting results.
Investment income continues to be the principal contributor to Malayan’s overall earnings, supporting its track record of positive earnings. Prospectively, AM Best expects underwriting performance to remain supported by ongoing portfolio remediation measures, as well as business growth in more profitable retail segments.
Ratings affirmed
AM Best has affirmed Malayan’s Financial Strength Rating of ‘B++’ (Good), the Long-Term Issuer Credit Rating of ‘bbb’ (Good), and the Philippines National Scale Rating (NSR) of ‘aa+.PH ‘(Superior). The outlook of these credit ratings is ‘Stable.’
These ratings reflect Malayan’s balance sheet strength, which AM Best assessed as 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.
Balance sheet strength
Malayan’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which is at the strongest level. Risk-adjusted capitalisation improved in 2023, with ongoing reinsurance claims settlement supporting a reduction in the company’s exposure to credit risk.
In addition, recent measures to de-risk Malayan’s investment portfolio have reduced its exposure to equity investment risk. Offsetting factors include the company’s high reliance on reinsurance to support the underwriting of large commercial risks and its exposure to counterparties that are non-rated on an international financial strength rating scale.
Additionally, the balance sheet is viewed to be sensitive to shock events, particularly arising from the occurrence of multiple severe catastrophe events in short succession.
Business profile
The business profile assessment of neutral reflects Malayan’s position as one of the largest non-life insurance companies in the Philippines. The company benefits from its affiliation with the Yuchengco Group of Companies, a large conglomerate in the Philippines, in terms of branding and distribution.
Malayan continues to demonstrate a strong commitment to digital transformation, which is an important pillar of its long-term strategy for retail business development.