SINGAPORE--(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. Energas is the sole captive insurer of Petroliam Nasional Berhad (Petronas), Malaysia’s national oil and gas company.
The ratings reflect Energas’ balance sheet strength, which AM Best categorizes 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 Petronas.
AM Best expects Energas’ risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), to remain at the strongest level over the medium term, supported by its low underwriting leverage and a conservative investment approach. A partially offsetting balance sheet factor is the company’s reliance on third-party reinsurance to enable it to underwrite large limit risks and appropriately manage its aggregate exposures.
Energas has a track record of strong operating performance, with a five-year average combined ratio that is below 60% and a return on equity ratio of 11% (2013-2017). Underwriting performance remains subject to volatility dependent on large loss experience, as well as arising from changes in capital expenditure and operational activity at the parent, Petronas, which drives shifts in absolute premium generation at Energas. The company’s low operating costs and steady stream of reinsurance commission income have contributed to the company’s overall profitability. Prospective results are subject to volatility in claims experience, as Energas provides large policy limits compared with its premium income. However, this should be moderated partially by the captive’s comprehensive reinsurance program.
Energas is well-integrated within the Petronas group’s risk management framework and has an active role in overseeing and containing the group’s insurance costs. Energas has a developed ERM framework, with clear risk appetite and tolerance levels in place.
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.
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