AM Best Affirms Credit Ratings of Lonpac Insurance Bhd

SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of Lonpac Insurance Bhd (Lonpac) (Malaysia). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Lonpac’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

Lonpac’s risk-adjusted capitalisation was at the strongest level at year-end 2023, as measured by Best’s Capital Adequacy Ratio (BCAR), and is expected to remain at this level over the near to medium term. During the past five years (2019-2023), the company has demonstrated strong capital growth from retained earnings, taking into account the high dividend payout ratio over this period. In addition, the company has a generally conservative investment portfolio comprising cash, bonds and debt-focused unit trust funds. However, AM Best considers Lonpac to have a moderate dependence on third-party reinsurance to support the underwriting of large-limit risks and manage its catastrophe exposures.

In December 2024, Public Bank Berhad (PBB) acquired a 44.15% stake in LPI Capital Bhd (LPI), Lonpac’s ultimate parent, from the estate of the late founder, Tan Sri Teh Hong Piow and Consolidated Teh Holdings Sdn Bhd, making PBB the largest shareholder of LPI. It is AM Best’s view that the transfer of shares will have a neutral impact on the credit rating fundamentals of Lonpac.

AM Best views the company’s operating performance as strong, supported by robust underwriting results. Underwriting margins for property and bond classes of business have benefited from a low net loss experience and favourable reinsurance commission income over recent periods, which remain the key drivers of technical profitability. Investment returns continue to be a stable contributor to the company’s overall earnings. As of 31 October 2024, Lonpac’s 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, the elevated cost of reinsurance, 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.

AM Best views Lonpac’s business profile as neutral. The company is a medium-size non-life insurer in Malaysia, with a market share of approximately 7%, based on 2023 gross written premium. The company’s underwriting portfolio is diversified moderately by line of business, albeit with majority of business originating from Malaysia. Lonpac benefits from a long-standing relationship with Public Bank Berhad, which provides the company with preferential access to profitable property business through the banking channel.

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

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AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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