RAM Ratings has affirmed Manulife Holdings Berhad's (MHB or the Group) corporate credit ratings (CCRs) of AA2/Stable/P1.
The ratings agency noted that MHB is debt-free at the holding company level, its CCRs are equated to the Group's credit strength, which primarily reflects the credit profile of Manulife Insurance Berhad (MIB), the Group's core insurance subsidiary. The ratings also incorporate an uplift reflecting the rating agency's assessment on the likelihood of parental support. This considers MHB's importance to its parent Manulife Financial Corporation (MFC), in light of MFC's Asia-focused growth strategy, as well as the strength of the relationship of the two entities.
On a stand-alone basis, MIB has a healthy capital position and sound insurance, investment and liquidity risk management. MIB's modest market presence and moderately high equity securities exposure, however, partially offset its credit strength. As part of the larger group, MHB can leverage MFC's established branding and management support. MFC's technical expertise in product development and investment management also allows MHB to innovate and offer products aligned with market demand.
While lower y-o-y, MIB's capital adequacy ratio remains healthy, significantly exceeding its individual target capital level RAM added.. MIB's business growth continues to gain from its multi-channel distribution strategy. The renewal of its bancassurance partnership with Alliance Bank Berhad for another 15 years in 2023 fuelled new business volumes, which increased 12.4% in FY Dec 2023 and 51.2% in 1H FY Dec 2024.
The small scale of MHB's life insurance and asset management businesses is still a key rating constraint. MIB's share of the industry's total annualised premium equivalent stood at 2.6% as at end-June 2024, while Manulife Investment Management (M) Berhad (the Group's asset management unit) held a 2.7% share of the sector's assets under management on the same date.
Stronger investment returns from more favourable market conditions pushed MHB's pre-tax return on assets up to 1.7% in FY Dec 2023 and 2.0% (annualised) in 1H FY Dec 2024 (FY Dec 2022: 0.8%). The current market environment is expected to be supportive of the Group's profitability in the second half. RAM highlighted that prospects for achieving sustainable long-term improvements in profitability, however, will depend on MHB successfully scaling up, which is essential for better expense management and risk pooling.
