The ratings reflect MICO’s strong risk-adjusted capitalization and its business profile in the Philippine non-life insurance market.

MICO’s risk-adjusted capitalization is strong and supported by its low underwriting leverage. MICO manages credit risk by maintaining a panel of strongly rated reinsurance counterparties. MICO has a strong profile in the corporate segment of the Philippine non-life market and ranks as the largest in terms of premiums and second largest in terms of capital and surplus. MICO’s profile helped the company to achieve strong growth in its motor portfolio in 2014 and 2015.

An offsetting factor includes MICO’s unsatisfactory underwriting performance, which has lagged the industry by a significant margin. Management initiatives have helped to narrow underwriting losses and underwriting is expected to break even in 2016. The company’s capital is exposed to fair value reserve movements due to high investment allocations to equity securities.

Positive rating momentum is not anticipated.

Negative rating action could result from a deteriorating financial performance due to a failure to improve underwriting results in line with industry levels or unexpectedly large fair value reserve movements.

Ratings are communicated to rated entities prior to publication and, unless stated otherwise, the ratings were not amended subsequent to that communication.

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