Lonpac expected to hold 7% of Malaysia's market

The company has demonstrated consistent capital growth over the past five years.

Lonpac Insurance Bhd (Lonpac) (Malaysia) has shown a robust balance sheet, strong operating performance, and appropriate enterprise risk management, AM Best said.

Looking ahead, Lonpac's risk-adjusted capitalisation, measured by Best’s Capital Adequacy Ratio (BCAR), is expected to remain at the strongest level in the near to medium term.

The company has demonstrated consistent capital growth over the past five years despite maintaining a high dividend payout ratio, supported by retained earnings and a conservative investment portfolio comprising cash, bonds, and debt-focused unit trust funds. 

However, AM Best notes Lonpac's moderate reliance on third-party reinsurance to manage large-limit risks and catastrophe exposures.

Whilst Lonpac’s operating performance remains strong, supported by stable underwriting profits and consistent investment returns, the company faces potential challenges. 

The rising cost of reinsurance and the ongoing liberalisation of motor and fire insurance pricing in Malaysia could pressure underwriting margins in the medium term. 

Despite these factors, the company’s underwriting margins, particularly in property and bond insurance, continue to benefit from low net loss ratios and favourable reinsurance commission income.

AM Best expects Lonpac to maintain its current market position, with approximately 7% of Malaysia's non-life insurance market based on 2023 gross written premiums. 

The company’s business profile is bolstered by its long-standing relationship with Public Bank Berhad, which provides preferential access to profitable property insurance through the banking channel. 

The recent acquisition of a 44.15% stake in Lonpac’s parent company, LPI Capital Bhd, by Public Bank Berhad is not expected to impact Lonpac’s credit fundamentals.