[RAM] RAM Ratings reaffirms MNRB's and Malaysian Re's ratings

RAM Ratings has reaffirmed the ratings of MNRB Holdings Berhad (MNRB or the Group) and Malaysian Reinsurance Berhad (Malaysian Re), as listed in Table 1.


Table 1: Ratings of MNRB and Malaysian Re

The rating action considers MNRB’s strong market position in the domestic reinsurance space through wholly owned subsidiary, Malaysian Re, and the adequate capitalisation of its operating subsidiaries. Although Malaysian Re is still its largest earnings contributor (50%-80% of pre-tax profits in the last five years), the Group’s takaful operations – especially the non-life business – have garnered healthy growth momentum in recent years. Meaningful growth in the takaful subsidiaries could increase the stability of MNRB’s earnings in the long run, given the susceptibility of the reinsurance unit to large claims. 

MNRB’s ratings also reflect the subordination of its creditors to the policyholders and creditors of its regulated operating entities, as well as moderate leverage at the holding company level. MNRB’s gearing and double leverage ratios remained well within the rating limits at 0.3 times and 1.1 times, respectively, as at end-September 2022 (rating thresholds: 0.5 times and 1.4 times). The capital adequacy ratios of the Group’s main subsidiaries were still sufficiently above their respective individual target capital levels and the regulatory minimum of 130% as at end-September 2022.

Despite profit improvements in recent years in tandem with the growth traction of its subsidiaries, the Group is subject to some degree of earnings variability in view of the reinsurance unit’s susceptibility to large claims and, to a lesser extent, the ability of the takaful units to sustain their growth momentum. MNRB registered healthy topline growth in FY Mar 2022 (net earned premiums: +12% y-o-y; FY Mar 2021: +16%) but pre-tax profit almost halved to RM127.5 mil (FY Mar 2021: RM223.2 mil) owing to heftier claims from Malaysian Re and dampened investment returns, to a smaller degree. The claims include large losses from floods in Malaysia and across several European countries. Pre-tax profit dropped to RM15.1 mil in 1H fiscal 2023 for similar reasons (1H fiscal 2022: RM97.8 mil), with the impact of investment losses (mostly marked-to-market movements amid monetary policy normalisation) being more significant. 

MNRB and Malaysian Re were sufficiently liquid, with liquid assets well exceeding their short-term financial obligations as at end-March 2022, supported by sizeable pools of term deposits (41% and 58% of total invested assets, respectively, as at end-September 2022). Malaysian Re’s reserve coverage also stayed sound, with a net technical reserve ratio of 165% as at end-September 2022, unchanged from end-March 2021.


Analytical contacts
Loh Kit Yoong
(603) 3385 2493
kityoong@ram.com.my

Sophia Lee
(603) 3385 2619
sophia@ram.com.my