AM Best Affirms Credit Ratings of Energas Insurance (L) Limited
May 06 2021 - 9:33AM
Business Wire
AM Best has affirmed the Financial Strength Rating of A
(Excellent) and the Long-Term Issuer Credit Rating of “a” of
Energas Insurance (L) Limited (Energas) (Malaysia). The outlook of
these Credit Ratings (ratings) is stable.
These ratings reflect Energas’ balance sheet strength, which AM
Best assesses as very strong, as well as its strong operating
performance, neutral business profile and appropriate enterprise
risk management (ERM). In addition, the ratings factor a neutral
impact from the company’s 100% ownership and integration with
Petroliam Nasional Berhad (Petronas).
The company’s risk-adjusted capitalisation remains at strongest
level, as measured by Best’s Capital Adequacy Ratio (BCAR),
supported by Energas’ low underwriting leverage, conservative
investment strategy and strong liquidity. Investment assets consist
of mainly cash and deposits held at well-established domestic
financial institutions, and investment-grade debt securities. An
offsetting factor is Energas’ high exposure to low frequency-high
severity loss events given the nature of the company’s energy
portfolio. Nonetheless, the significant underwriting risks are
managed through the company’s low net retention and comprehensive
reinsurance programs, which are placed with high quality
reinsurers.
Despite the company’s history of volatile loss ratios, Energas
has demonstrated a track record of strong underwriting performance
as demonstrated by a favorable five-year average combined ratio of
53% (2016-2020). Management expenses as a percentage of net premium
earned (management expense ratios) have been consistently low at
less than 4% over the past five years, while reinsurance commission
income has offset the company’s acquisition costs and remained
instrumental in generating Energas’ underwriting profits.
Investment income arising from bank deposits and debt securities
has contributed considerably to overall earnings and helped
counterbalance volatility in the company’s technical results.
However, Energas may face a prospective decline in reinsurance
commission income under a hardening reinsurance market, and a
decrease in investment returns given the prolonged low interest
rate environment.
As a single-parent captive of Petronas, Energas benefits from a
direct access to the group and a comprehensive knowledge of its
insurance risks, which effectively facilitate the company’s
underwriting activities. Nevertheless, the company’s portfolio is
heavily concentrated by line of business and geography by being
focused mainly on large energy risks in Malaysia. On the back of
the gradual recovery of oil and gas industry, AM Best expects
Energas to grow its premium volume, driven by the group’s higher
planned capital expenditures, as well as potential rise in premium
rates for upstream and downstream business.
The company’s ERM framework is well-integrated into the group’s
risk management function. AM Best considers Energas’ risk
management capabilities to be appropriate for the company’s key
risk profiles.
AM Best remains the leading rating agency of alternative risk
transfer entities, with more than 200 such vehicles rated
throughout the world. For current Best’s Credit Ratings and
independent data on the captive and alternative risk transfer
insurance market, please visit www.ambest.com/captive.
Ratings are communicated to rated entities prior to
publication. Unless stated otherwise, the ratings were not amended
subsequent to that communication.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Guide to Best’s
Credit Ratings. For information on the proper media use of Best’s
Credit Ratings and AM Best press releases, please view Guide for
Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global credit rating agency, news publisher and
data analytics provider specialising in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
Copyright © 2021 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Tran Nhat Trung Financial Analyst +65 6303
5019 trung.tran@ambest.com
Yuan Tian Senior Financial Analyst +65 6303
5016 yuan.tian@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy Director, Communications +1 908 439
2200, ext. 5644 james.peavy@ambest.com