AM Best affirms Energas ratings
AM Best has affirmed the financial strength rating of A and the long-term issuer credit rating of “a” of Energas Insurance. The outlook of these ratings is negative.
The ratings reflect Energas’ balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management. In addition, the ratings factor in a neutral impact from the parent company, Petroliam Nasional Berhad (PETRONAS), which is the national oil and gas company of Malaysia.
The negative outlooks reflect pressure on Energas’s strong operating performance assessment. The company’s underwriting performance has shown a trend of deterioration that was exacerbated by heightened claims frequency. Nevertheless, Energas’s underwriting performance has shown an improvement in the first nine months of 2024, supported by favourable loss experience and premium rate increases. Notwithstanding ongoing remedial measures, the effectiveness of these actions remains subject to execution risk.
Energas’ balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best views Energas’ investment portfolio as conservative, with a majority of its investments allocated to cash and deposits, and the remainder invested in good quality government and corporate bonds. Capital requirements arising from underwriting risks are viewed by AM Best to be low given the company’s low net underwriting leverage. Potential accumulation of high severity losses from multiple policies may lead to balance sheet volatility, although the risk is mitigated by reinsurance.
AM Best considers Energas’ business profile to be neutral. As a single-parent captive to PETRONAS, Energas benefits from business access to the group’s insurance risks. However, the company’s underwriting portfolio shows concentration by line of business and geography, with a significant focus on upstream and downstream energy risks located in Malaysia.
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