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Fitch Affirms Etiqa Insurance Entities at 'A-'; Outlook Stable
June 16, 2017 / 6:17 AM / in 5 months

Fitch Affirms Etiqa Insurance Entities at 'A-'; Outlook Stable

(The following statement was released by the rating agency) SINGAPORE/HONG KONG, June 16 (Fitch) Fitch Ratings has affirmed the 'A-' (Strong) Insurer Financial Strength (IFS) ratings of Etiqa group's core insurance operating entities; Etiqa Insurance Berhad (EIB), Etiqa Takaful Berhad (ETB) and Etiqa Insurance Pte Ltd (EIPL). The Outlook is Stable. KEY RATING DRIVERS The affirmation reflects Etiqa group's established market franchise as one of Malaysia's major insurance groups, with dominant market positioning in the conventional insurance and takaful sectors. The affirmation also considers the group's very strong capitalisation, supported by the core operating entities' strong investment and liquidity profile and very strong profitability. Fitch views the group's business profile as strong. EIB, ETB and EIPL are considered core subsidiaries of Maybank Ageas Holdings Berhad (MAHB) and hence all have been assigned the group rating. All three entities are wholly owned by MAHB and contributed more than 90% of group total gross premiums in 2016. The entities share the 'Etiqa' branding and show significant coordination in their processes, management and resources. Fitch expects MAHB to have adequate financial and capital strength to support its core operating entities if needed. In addition to its significant insurance market share in Malaysia, the group maintains a modest presence in Singapore as a composite insurer. Overall, at the group level, MAHB's absolute-size by total equity and net premiums remains smaller relative to other Fitch-rated regional insurance groups. All three entities reported regulatory risk-based capital (RBC) ratios well above the individual target capital level (ITCL) set according to its risk profile and therefore well above the minimum regulatory benchmarks. This was underpinned by ongoing surplus growth and sound capital management at the entity and group level. MAHB's score on Fitch's Prism Factor-Based Capital Model and consolidated financial leverage stood at 'Very Strong' and 14% respectively, which Fitch sees as acceptable and well within the median guidelines for MAHB's rating category. Fitch expects the new operating entities, following Bank Negara Malaysia's requirement for composite insurers to split their operations into separate licenses by 2018, to continue to be managed at a group level, with capital support coming from MAHB. The three entities' investment mix and liquidity profiles remained sound in 2016. Investments in fixed-income securities, cash and deposits accounted for more than 80% of total invested assets and exposure to risky assets, such as equities, was manageable. Fitch expects the investment strategy to remain prudent and not to deviate significantly in the near-term. Fitch views Etiqa group's profitability to be very strong. EIB and ETB achieved combined ratios below 100% for their general insurance businesses, and the group's bottom-line profitability, measured by pre-tax return-on-assets, improved to 3.0% (2015: 2.3%) and its return-on-equity improved to 12.4% (2015: 8.7%), helped by higher investment returns and favourable underwriting results. RATING SENSITIVITIES Key triggers for a rating downgrade include: - Changes in the status of EIB, ETB or EIPL as a core operating entity of the Etiqa group - Deterioration in the entities' capitalisation, with EIB's or EIPL's statutory RBC ratio falling below 200% persistently, ETB's statutory RBC ratio falling below 150% on a sustained basis or deterioration in MAHB's Prism score to below 'Strong'. - Significant decline in the entities' financial performance, with EIB's or ETB's general insurance and takaful combined-ratio above 105% consistently, or a sharp decline in EIB's and ETB's lapse rates/mortality profits in the life and family takaful business - Sustained increase in MAHB's consolidated financial leverage to above 30% An upgrade is unlikely in the near term, as the Insurer Financial Strength rating is constrained by Malaysia's Long-Term Local-Currency Issuer Default Rating of 'A-'. Contact: Primary Analyst Christopher Han, CFA Associate Director +65 6796 7224 Fitch Ratings Singapore Pte Ltd. One Raffles Quay South Tower #22-11 Singapore 048583 Secondary Analyst Jeffrey Liew Senior Director +852 2263 9939 Committee Chairperson Siew Wai Wan Senior Director +65 6796 7217 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email:; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. 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