A.M. Best Asia-Pacific Limited has upgraded the issuer credit
rating (ICR) to “bbb+” form “bbb” and affirmed the financial strength
rating of B++(Good) of Malayan Insurance Co., Inc. (MICO)
(Philippines). The outlook for both ratings is stable.
The ICR upgrade reflects MICO’s solid risk-adjusted capitalization,
prominent business profile in the Philippines market and its
consistently favorable investment performance.
MICO’s capital and surplus has registered healthy growth since it was
initially rated by A.M. Best in 2005. MICO’s risk-based capitalization
level, as measured by Best’s Capital Adequacy Ratio (BCAR), also has
been on an upward trend over the years. The company’s capitalization
level remained solid in 2011, despite its recent loss from the Thailand
flooding. A.M. Best expects that MICO will maintain its robust
capitalization level to support its current ratings in the near term.
Being in business for over 80 years, MICO has established a strong brand
name and distribution network in the Philippines. During the last four
decades, the company has maintained its position as the largest
Philippines non-life insurer in terms of gross premiums written.
The investment portfolio has been an important income source for MICO.
The company has consistently posted sufficient investment income to
offset its underwriting deficit and deliver a net profit every year for
the past five years. A.M. Best expects that the company’s investments
will continue to make an important contribution to its bottom line going
Offsetting rating factors include MICO’s unfavorable underwriting
results. MICO’s underwriting performance has not been satisfactory in
the past five years, primarily due to its high expense ratio relative to
regional peers. The company’s underwriting results in 2011 and 2012 also
have been impacted by its losses from the Thailand flooding. To improve
its underwriting performance, MICO has further tightened its
underwriting policy, especially on its inward foreign treaty. Management
also is committed to increasing employee productivity as a means to
lower its expense ratio.
Future upward rating movements could occur if MICO demonstrates a
significant improvement in its underwriting performance. Conversely,
negative rating movements could occur if there is a material decline in
MICO’s risk-based capitalization level.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include:
“Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best
Ratings”; “Evaluating Country Risk”; and “Risk Management and the Rating
Process for Insurance Companies.” Best’s Credit Rating Methodology can
be found at www.ambest.com/ratings/methodology.
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