The rating of MAA Holdings Berhad’s (MAAH) RM120 million Serial Bonds has been upgraded from A- to A with a stable outlook. The rating reflects the overall financial strength of its main subsidiary Malaysian Assurance Alliance Berhad (MAA) and MAAH’s successful issuance of its RM200 million CP/MTN Programme for debt repayment, working capital and business expansion in January 2007. MAAH continues to derive most of its income from dividends upstreamed by MAA which maintains a strong local franchise and market position as one of the country’s leading composite insurers. In the future, the entity might see contributions coming in from its latest venture as well – MAA Takaful Berhad, which will ride on MAA’s resources.

In 2005, MAA continued to retain a place in the domestic life sector’s top five in terms of premium income whereas its general business recorded a slight slip in ranking. MAA’s growth can be attributed to its emphasis in elevating the level of professionalism of its agents to improve sales productivity and a vast network of branch offices; its broad product range offerings, and an experienced management team. As a result of a bearish equity market in 2005, MAA registered losses arising from disposal of equities and had to make hefty provisions for diminution in the value of its investment assets. Results for FY 2006 are expected to improve as the bullish equity performance could see sizeable writebacks for MAA. Moving forward, a heavier weight will be placed on corporate debt securities while exposure to equities will be reduced; especially in the non-participating and general funds, so as to improve yield with acceptable risk premium.

MAA continues to develop innovative savings and investment products. Single premium non-participating endowment business generated 69.9% of total new annualised business premiums in 2005. Meanwhile, sales of MAA’s fixed dividend endowment plan (FDE), which is a capital and dividend guaranteed plan, accounted for 78.4% of total single premium income for YTD June 2006. The FDE was also responsible for the substantial increase in net policy benefits as there was a large maturity payout due to the short-term nature of the product. Strong growth in MAA’s in-force FDE business will increase the insurer’s reliance on spread income, and its exposure to liquidity risk. Realizing that single premium products account for the majority of MAA’s business, which is subject to income volatility, MAA launched a number of regular premium products in 2006.


At the general insurance business level, higher than industry’s gross premium growth coupled with stringent underwriting, which led to an improved claims ratio, is viewed favourably. However, the high concentration in the motor business moderates the rating in light of present day’s negative outlook on the automotive industry, escalating motor claims and the delayed tariff rate adjustment for compulsory motor ‘Act’ coverage. Notwithstanding the foregoing, current competitive industry environment will continue to challenge MAA’s ability to form a strong franchise in the general insurance segment.

MAA’s lower dividend payout in relation to FY2005 reflects its impeded capacity to upstream dividends primarily due to constrains from a bearish equity market in 2005. Offsetting this is MAAH’s ability to tap the capital markets for liquidity.



MARC’s rating upgrade also reflects the successful issuance of RM200 million CP/MTN Programme early this year. RM30 million being proceeds from the new issue, has been earmarked towards settlement of the final principal installment of the serial bonds which is due in August 2007. The monies are currently held in the sinking fund account for the CP/MTN Programme to be released into the Debt Service Reserve Account of the aforesaid Serial Bonds in accordance with the terms of the issue.