AM BEST AFFIRMS LONPAC INSURANCE CREDIT RATINGS AS EXCELLENT

KUALA LUMPUR, Nov 30  (Bernama) -- Global credit rating agency AM Best has affirmed Malaysia’s Lonpac Insurance Bhd (Lonpac) Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent).

In a statement, AM Best said these credit ratings which have a stable outlook reflected Lonpac’s balance sheet strength, which was assessed as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

Lonpac’s risk-adjusted capitalisation is at the strongest level at year-end 2022, as measured by Best’s Capital Adequacy Ratio, and is expected to remain at this level over the near to medium term.

Despite a high dividend payout ratio over the past five years (2018-2022), the company has demonstrated strong capital growth from retained earnings over this period, in addition to having a generally conservative investment portfolio comprising cash, bonds and debt-focused unit trust funds.

The rating agency views Lonpac’s operating performance as strong, as evidenced by its five-year average return-on-equity ratio of 28.3 per cent and combined ratio of 67.5 per cent (2018-2022).

The company observed an uptick in claims activity in 2022 and the first 10 months of 2023 mainly due to easing of COVID-19-related movement restrictions in Malaysia. As of Oct 31, 2023, its operating performance remains favourable, driven by stable underwriting profit and investment performance.

Whilst AM Best expects Lonpac to maintain its strong operating performance over the medium term, claims normalisation and reinsurance market hardening, as well as the ongoing phased liberalisation of motor and fire insurance pricing in Malaysia may constrain underwriting margins over the near to medium term.

Meanwhile, the company’s business profile was viewed by the rating agency as neutral. Lonpac is a mid-sized non-life insurer in Malaysia, with a market share of approximately eight per cent, based on 2022 gross direct premium.

The company’s underwriting portfolio is diversified moderately by line of business, albeit with the majority of business originating from Malaysia, and benefits from a long-standing relationship with Public Bank Berhad, which provides Lonpac with preferential access to profitable property business via the banking channel.

-- BERNAMA