DEBT WATCHER AM Best has kept Malayan Insurance Co., Inc.’s credit ratings on the back of its strong balance sheet.

AM Best affirmed Malayan Insurance’s financial strength rating of “B++” (Good). It likewise kept the insurer’s Long-Term Issuer Credit Rating of “bbb” (Good) and Philippines National Scale Rating (NSR) of “aa+.PH” (Superior) for 2023.

The debt watcher also maintained its “stable” ratings outlook for the nonlife insurer.

AM Best is a global credit rating agency specializing in the insurance industry.

“Despite the current economic landscape, we remain vigilant in ensuring that we can support the needs of our clients in any situation,” Malayan Insurance President and Chief Executive Officer Paolo Y. Abaya said in a statement over the weekend.

Malayan Insurance’s premium income stood at P4.27 billion in 2023 while its net income was at P600.77 million, ranking second among nonlife insurers for both metrics.

Its assets stood at P42.56 billion at end-2023, while its net worth was at P5.04 billion. The insurer’s paid-up capital was at P979.13 million.

AM Best said in a separate statement dated Aug. 9 that its latest rating action for Malayan Insurance reflects the nonlife firm’s strong balance sheet, adequate operating performance, neutral business profile and appropriate enterprise risk management.

“Malayan’s balance sheet strength assessment is underpinned by its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, which is at the strongest level. Risk-adjusted capitalization improved in 2023, with ongoing reinsurance claims settlement supporting a reduction in the company’s exposure to credit risk,” it said.

“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,” the credit rater added.

AM Best also noted that the insurer posted a five-year average return on equity ratio of 3.8% from 2019 to 2023, reflecting an adequate operating performance.

“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 catastrophe and large loss events, which negatively impacted Malayan’s core commercial lines,” it said.

“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,” the credit rater added.

Its neutral business profile assessment of Malayan Insurance reflects the company’s position as one of the largest nonlife firms in the Philippines, AM Best said.

“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 toward digital transformation, which is an important pillar of its long-term strategy for retail business development.” — BMDC

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