Thursday July 19, 2012
Etiqa rating reaffirmed
PETALING JAYA: Fitch Ratings has affirmed Etiqa Insurance Bhd's insurer financial strength (IFS) rating at A with stable outlook.
In a statement yesterday, Fitch Ratings said the rating reflected Etiqa's strong risk-adjusted capitalisation, ongoing premium growth, diversified distribution networks and stable operating performance. The rating also considers Etiqa's strong liquidity position and its status as a core member of Maybank Ageas Holdings Bhd.
“Etiqa has consistently strengthened its market coverage in Malaysia through its extensive distribution network. The company's non-life premium and new life business grew 13.4% and 90.7% respectively, in the second half of 2011. The overall underwriting result of Etiqa's general insurance fund remained satisfactory although higher commission and underwriting expenses moderately worsened its combined ratio to 96.4% in the second half of 2011 compared with 91.3% for the financial year ended June 2011,” the agency said.
As Etiqa broadens its market presence by further leveraging its bancassurance partnership with Malayan Banking Bhd (Maybank), Fitch Ratings expects profit contribution from Etiqa's life fund to further increase.
It said Etiqa's liquidity position remained strong for meeting cash outflows arising from insurance claims liabilities. Liquid assets, including structured deposits, accounted for about 2.4 times of its net technical reserves at end-2011.
Additionally, Fitch Ratings said the company's risk-based capitalisation as measured by Fitch's internal capital model is solid and supportive of the current rating. Its regulatory risk-based capitalisation after dividend payment to Maybank Ageas was about 248% at end-2011, was in excess of the statutory minimum of 130%.
Partially offsetting these positive attributes includes the possibility of capital re-allocation from Etiqa to other operating entities of Maybank Ageas, due to a potential change to the Malaysian takaful regulatory capital regime. Fitch Ratings expects the underwriting result of Etiqa's motor class to be constrained by the adverse claim ratio of the third-party motor insurance industry.
“Key rating triggers that could lead to a downgrade include a drop in Etiqa's statutory risk-based capital ratio to levels much lower than 200% over an extended period; a sustained increase in the combined ratio higher than 110%; and a sharp decline in the persistency rate and mortality profit,” it said.
Fitch Ratings views an “upgrade in the near term as unlikely,” given Etiqa's rating was at Malaysia's long-term local currency issuer default rating (A/Stable).