AM Best affirms credit ratings of Lonpac Insurance

09/12/2022 01:38 PM

KUALA LUMPUR, Dec 9 (Bernama) -- Credit rating agency 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.

AM Best in a statement said the 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 balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year-end 2021, 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 (2017- 2021), the company has demonstrated strong capital growth from retained earnings over this period,” it said. 

AM Best said it assessed Lonpac’s operating performance as strong, as evidenced by its five-year average return-on-equity ratio of 31.5 per cent and a combined ratio of 66.1 per cent (2017-2021).

The rating agency said the insurance company’s combined ratio improved in 2021, driven by COVID-19-related movement restrictions in Malaysia.

“This has been followed by an uptick in claims activity this year due to the easing of these restrictions. Underwriting margins for property and marine classes of business have benefited from low net loss experience and favourable reinsurance commission income over a number of years, which remain the key drivers of technical profitability,” it added.

It also said investment returns continued to be a stable contributor to overall earnings. Prospectively, claims normalisation, 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.

“Nonetheless, AM Best expects the company to maintain strong operating performance over the medium term, supported by its disciplined underwriting approach,” it said.


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