A.M. Best has revised the outlooks to stable from positive and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" of Malaysian Reinsurance Bhd. (Malaysian Re) (Malaysia).
The revised outlooks of these Credit Ratings (ratings) reflect the increasing trend in Malaysian Re's combined ratio. The company's combined ratio has deteriorated from the low 90% range in 2013 to 100% year to date through the end of September 2017, mainly due to increased claims ratios in its international book. While the company is taking corrective action, concerns remain about execution risk.
The ratings reflect Malaysian Re's balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. Malaysian Re's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio, remains solid and is supported by low underwriting leverage and a prudent investment portfolio. The company benefits from a regulated cession arrangement, or voluntary cessions, in Malaysia's non-life market, which contributes significantly to its premium revenue and overall profits. Over the years, voluntary cession volumes have declined following a regulatory reduction in voluntary cession rates. In response, Malaysian Re has grown its overseas reinsurance business, which has proven to be more volatile and less profitable than its domestic portfolio.
