KUALA LUMPUR: Global credit rating agency, AM Best, has affirmed the financial strength rating of A (excellent) and the long-term issuer credit rating of ‘a’ (excellent) for Malaysia’s Lonpac Insurance Bhd (Lonpac).
According to BERNAMA News Agency, these ratings come with a stable outlook, reflecting Lonpac’s robust balance sheet strength, strong operating performance, neutral business profile, and sound enterprise risk management. Lonpac’s risk-adjusted capitalisation was rated at the strongest level by Best’s Capital Adequacy Ratio at the end of 2023 and is expected to maintain this level in the near to medium term. Over the past five years, the company has achieved robust capital growth from retained earnings, despite a high dividend payout ratio.
Lonpac’s investment strategy is characterized by a conservative portfolio consisting of cash, bonds, and debt-focused unit trust funds. However, AM Best notes that the company relies moderately on third-party reinsurance to underwrite large-limit risks and man
age its exposure to potential catastrophes.
In December, Public Bank Berhad (PBB) acquired a 44.15 percent stake in LPI Capital Bhd (LPI), the parent company of Lonpac, 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. AM Best believes this transfer of shares will have a neutral impact on Lonpac’s credit rating fundamentals.
Lonpac’s strong operating performance is underpinned by solid underwriting results, particularly in the property and bond sectors. Favorable reinsurance commission income and low net loss experiences have bolstered the company’s technical profitability. However, AM Best cautions that the rising cost of reinsurance and the ongoing phased liberalization of motor and fire insurance pricing in Malaysia may pressure underwriting margins in the medium term.
The agency views Lonpac’s business profile as neutral, noting its status as a medium-sized non-life insurer with a market share of approximately s
even percent based on the 2023 gross written premium. While Lonpac’s underwriting portfolio is moderately diversified by line of business, the majority of its business originates within Malaysia. The company benefits significantly from its longstanding relationship with Public Bank Berhad, which grants it preferential access to profitable property business through banking channels.