RAM Ratings reaffirms Hong Leong Assurance’s AA2 rating

Published on 05 Dec 2022.

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RAM Ratings has reaffirmed Hong Leong Assurance’s (HLA or the Insurer) AA2/Stable/P1 insurer financial strength (IFS) ratings and the AA3/Stable rating of its RM2.0 billion Subordinated Notes Programme (2020/-). The one-notch difference between HLA’s long-term IFS rating and the rating of the Programme reflects the status of the notes as unsecured and subordinated obligations of the Insurer. 

With a 10% share of the industry’s annual premium equivalent (APE) in 1H 2022, HLA is the fourth-largest life insurer in Malaysia. The Insurer boasts strong distribution capabilities, anchored by its agency force and access to the branch network of its sister company, Hong Leong Bank Berhad. Following a spike in FY Jun 2021 (+29.9%), the Insurer’s APE dipped in FY Jun 2022 (-12.2%) as pent-up demand eased and further lockdowns were imposed at the start of the financial year. Nevertheless, new business (NB) volume was still decent.

As part of HLA’s focus, regular-premium policies made up a large portion (76%) of NB premiums. By product mix, investment-linked (IL) policies accounted for 87% of NB premiums while the contribution from participating plans was small at 3%. IL plans will remain instrumental to drawing NB volume, given the capital efficiency that they entail.

Backed by sound NB generation but moderated to some extent by the reduced persistency of in-force premiums, HLA’s gross premiums edged up to RM3.2 bil in FY Jun 2022 (FY Jun 2021: RM3.1 bil). The Insurer incurred large mark-to-market losses on investments of RM1.6 bil, caused by rising bond yields and unfavourable equity market conditions. However, the weak investment performance in large part led to a decline in insurance contract liabilities, which negated the fair value losses. As such, HLA ended FY Jun 2022 with a pre-tax profit of RM309 mil, little changed from RM316 mil in FY Jun 2021. Looking ahead, the Insurer expects healthy topline growth as the economy continues to recover. Earnings may stay under pressure in view of uneven economic recovery. 

We expect that HLA’s strong capital adequacy ratio will be supportive of NB generation and sufficiently cushion against volatile investment results. As at end-June 2022, liquid assets of RM15 bil (0.9 times HLA’s net insurance contract liabilities) provided an adequate liquidity buffer to meet potential claims.


Analytical contacts
Lee Yee Von
(603) 3385 2503

Sophia Lee
(603) 3385 2619


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

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Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

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