Fitch says the rating reflects EIB's broad distribution coverage, strong premium growth, a track record of sound operating performance and its status as a core member within Maybank Ageas Holdings Berhad (MAHB).
The rating recognises the company's solid risk-based capitalisation and strong liquidity position despite likely higher financial leverage after the proposed issue of subordinated debt in April 2013.
Fitch says EIB continues to maintain strong premium growth momentum through its bancassuance partnership with Malayan Banking Berhad (Maybank) and through its wide agency coverage across Malaysia.
Premium written from general and life insurance operations grew 18% and 88%, respectively, for the 12 months ended June 2012. Motor insurance and marine, aviation and transit (MAT) businesses are key growth drivers of EIB's general insurance's portfolio.
Business quality of the company's non-life insurance portfolio remains sound although its combined ratio deteriorated to 94.3% for the 12 months ended June 2012 from 91.3% over the same period in 2011. Mortality gain and investment return contributed favourably to the operating profitability of EIB's life insurance business.
EIB has maintained capital strength to support ongoing business growth and to absorb potential asset volatility. Its regulatory risk-based capitalisation was about 247% at end-June 2012, well in excess of the statutory minimum benchmark of 130%.
In view of EIB's prevailing operating margin (3.1% pre-tax return on assets for the 12 months ended June 2012), Fitch believes EIB's financial flexibility will remain sound after the planned subordinated debt issue. Fitch expects MAHB's financial leverage to rise above 10% post debt issue from zero at end-June 2012.
With more than 30% of its general insurance and shareholders' investments allocated to cash and deposits at end-June 2012, EIB has strong liquidity to meet claims from insurance liabilities.
Liquid assets (including structured deposits) accounted for about 2.55x of its general insurance's net technical reserves at end-June 2012.
Partly offsetting these positive attributes includes the market-wide adverse claims experience of the third-party motor insurance business and capital re-allocation within the operating entities of MAHB due to a change in Malaysian takaful regulatory capital regime.
Additionally, EIB has placed greater emphasis on regular premium life products to strengthen its growth sustainability as a significant portion of its premiums still comes from single premium investment-linked products which are sensitive to equity market performance.
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