SINGAPORE, May 13, 2022–(BUSINESS WIRE)–AM Best Affirmed Energas Insurance (L) Limited (Energas) (Malaysia) Financial Strength Rating of A (Excellent) and Issuer Long Term Credit Rating of “a” (Excellent). The outlook for these Credit Ratings (ratings) is stable.
The ratings reflect the strength of Energas’ balance sheet, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate management of business risks. The ratings also factor in a neutral impact from the company’s parent, Petroliam Nasional Berhad (Petronas), which is Malaysia’s national oil and gas company.
The company’s risk-adjusted capitalization remains at the highest level, as measured by Best’s capital adequacy ratio (BCAR), supported by Energas’ low underwriting leverage and conservative investment strategy. Investment assets consist primarily of cash and deposits held with well-established domestic financial institutions, as well as investment grade debt securities. However, Energas’ exposure to very serious claims, given the company’s concentration on energy-related risks, is a compensating factor in the solidity of the balance sheet. This is partly managed through the company’s low net premium retention and comprehensive reinsurance programs, which are placed with a panel of high credit quality reinsurers.
Energas has demonstrated a track record of strong operational performance, as evidenced by a favorable five-year average combined ratio of 66% (2017-2021). Despite the company’s history of loss ratio volatility, the company’s management expense ratio has always been low, while strong reinsurance commission income has offset acquisition costs and contributed significantly to earnings. techniques. The company’s operating performance continues to be supported by its investment income; however, in 2021 the company reported a decline in investment returns largely due to the low interest rate environment in Malaysia.
As a single-parent captive of Petronas, Energas benefits from direct access and in-depth knowledge of the group’s insurance risks, which has supported the company’s underwriting capacity. Nevertheless, the company’s portfolio is highly concentrated by industry and geography, with a particular focus on major energy risks in Malaysia.
Energas’ risk management capabilities are considered aligned with key business risk profiles. The company’s risk management framework is strongly integrated into the group’s risk management framework.
AM Best remains the leading rating agency for alternative risk transfer entities, with more than 200 such vehicles rated worldwide. For current Best 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 before publication. Unless otherwise indicated, the ratings have not been changed as a result of this communication.
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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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