Lonpac Insurance Bhd in Malaysia has received a favorable assessment from AM Best. The insurer has boasted a robust balance sheet, solid operating performance, and effective enterprise risk management. Its risk-adjusted capitalisation, as measured by the Best’s Capital Adequacy Ratio (BCAR), is anticipated to stay at the strongest level in the near to medium term.
Over the past five years, Lonpac has exhibited consistent capital growth even while maintaining a high dividend payout ratio. This has been made possible by retained earnings and a conservative investment portfolio that includes cash, bonds, and debt-focused unit trust funds. However, AM Best has pointed out Lonpac’s moderate dependence on third-party reinsurance for handling large-limit risks and catastrophe exposures.
While Lonpac’s operating performance is currently strong, with stable underwriting profits and consistent investment returns, it does face some potential challenges. The increasing cost of reinsurance and the ongoing liberalisation of motor and fire insurance pricing in Malaysia could put pressure on underwriting margins in the medium term. Nevertheless, the company’s underwriting margins, especially in property and bond insurance, still gain from low net loss ratios and favorable reinsurance commission income. AM Best foresees Lonpac maintaining its approximately 7% share of Malaysia’s non-life insurance market based on 2023 gross written premiums. Its business profile is further strengthened by its long-standing relationship with Public Bank Berhad, and the recent stake acquisition by the bank is not expected to affect Lonpac’s credit fundamentals.
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