Energas gets rating affirmation from AM Best
AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” of Energas Insurance. The outlook of these ratings is stable.
Energas is the sole captive insurer of Petroliam Nasional Berhad, Malaysia’s national oil and gas company.
According to AM Best the ratings reflect Energas’ balance sheet strength, which the rating agency categorises 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 percent ownership and integration with Petronas.
AM Best expects Energas’ risk-adjusted capitalisation, 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.
The rating agency also stated that Energas has a track record of strong operating performance, with a five-year average combined ratio that is below 60 percent and a return on equity ratio of 11 percent (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.