Malaysian Re benefits from favourable pricing, tighter practices

Its underwriting performance rebounded sharply in FY 2024.

Malaysian Reinsurance Berhad (Malaysian Re) benefits from profitable domestic voluntary cessions but continues to face challenges in managing volatility in its domestic non-voluntary cession and overseas businesses, according to Fitch Ratings.

Overseas business accounted for 60% of gross written premiums in the financial year ending 31 March (FY 2024), up from 52% in FY 2023, reflecting its diversification efforts.

Its underwriting performance rebounded sharply in FY 2024, recording an insurance/takaful service result of $76.46m (MYR341m), compared to a $0.45m (MYR2m) loss in FY 2023.

Net profit surged to $86.89m (MYR388m) from $12.77m (MYR57m) in FY23, driven by lower catastrophe losses, tighter underwriting practices, and favourable pricing. However, higher investment income was partly offset by a weaker insurance/takaful financial result.

Malaysian Re’s regulatory risk-based capital ratio remained well above the 130% minimum, supported by strong risk-adjusted metrics and a $44.80m (MYR200m) Tier 2 debt issuance in October 2022.

A key focus will be the renewal of Malaysia's mandatory 2.5% cession arrangement, which expires at the end of 2024. Potential changes to this arrangement could affect the reinsurer’s business profile and profitability.

Malaysian Re is mitigating this risk by strengthening ties with domestic insurers and expanding geographically.

Fitch also noted Malaysian Re’s low-risk investment strategy, with more than 80% of its portfolio held in cash, deposits, and fixed-income instruments and a risky-asset ratio of 18% as of FY 2024.

($1.00 = MYR4.46)