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RAM Ratings upgrades Hong Leong Assurance to AAA
Published on 24 Dec 2024.
RAM Ratings has upgraded Hong Leong Assurance Berhad’s (HLA or the Insurer) insurer financial strength (IFS) ratings from AA2/Stable/P1 to AAA/Stable/P1. Concurrently, the rating of its RM2 billion Subordinated Notes Programme (2020/-) has been raised from AA3/Stable to AA1/Stable. 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.
The upgrades are premised on our assessment that HLA benefits from a “high” likelihood of support (as defined in RAM’s new master criteria, Assessing Group Structure Rating Links, published in October 2024) from Hong Leong Financial Group Berhad (HLFG or the Group), a non-operating financial holding company whose credit metrics are driven by its major subsidiary, Hong Leong Bank Berhad (HLBB or the Bank, rated AAA/Stable/P1). Forming part of HLFG’s insurance arm, HLA is viewed to be a strategic component in reinforcing the Group’s domestic franchise. In FY Jun 2024, the Insurer contributed 11.1% of HLFG’s pre-tax profit.
The increasing business traction arising from recent efforts to harness intra-group synergies between HLA and HLBB, such as increased collaboration and cross-selling, is viewed positively. New business regular premiums from the bancassurance channel grew over 70% y-o-y in 4M FY Jun 2025, supporting HLBB’s aim to grow its wealth business and complementing the strong distribution capabilities of HLA’s agency force.
On stand-alone basis, HLA’s ratings also reflect its sturdy capitalisation and liquidity profile, mid-sized market share in the competitive life insurance industry, healthy earnings profile and volatile investment income. HLA held a 7.6% share of the industry’s annual premium equivalent (APE) in 1H 2024, which places it sixth among 14 players. Compared to the industry APE growth of 15.0%, HLA’s growth was flattish in FY Jun 2024 at 0.6% (FY Jun 2023: -16.4%) due to its focus on protection-oriented plans (which carry lower premiums) and less aggressive sales of medical policies. The bancassurance channel is anticipated to provide some uplift to the Insurer’s new business generation, particularly HLB’s Priority Banking segment which remains largely untapped.
Thanks to strong investment returns which offset higher incurred claims and benefit payments as well as acquisition costs, HLA’s pre-tax profit was up 8.5% at RM651 mil in fiscal 2024. As at end-June 2024, its liquid assets to net insurance contract liabilities ratio was 0.79 times, providing a healthy buffer against claims liabilities.
Analytical contacts
Lee Yee Von
(603) 3385 2503
yeevon@ram.com.my
Sophia Lee
(603) 3385 2619
sophia@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
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.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
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