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, it said 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 its assessment that HLA benefits from a "high" likelihood of support (as defined in the 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.