LPI Capital’s 3Q19 earnings slide 4% on increased claims, slower gross premiums

Volatile global economic conditions and ongoing trade disputes continue to affect the performance of the insurance industry, says chairman


LPI Capital Bhd’s net profit fell 4.4% to RM87.82 million in the third quarter ended Sept 30, 2019 (3Q19), from RM91.81 million a year ago, as claims increased and gross premium income slowed.

However, quarterly revenue rose 8.5% to RM423.84 million in 3Q19 from RM390.59 million the year before, the group said in a statement on Monday.

“LPI ended the 3Q of the financial year 2019 with a lower profit due to an increase in claims reported and slower growth in gross premium income,” LPI founder and group chairman Tan Sri Dr Teh Hong Piow (picture) said.

For the nine months ended Sept 30, 2019, the group’s net profit rose 2.5% to RM235.76 million from RM230.05 million in the same period last year, while revenue was up 7% at RM1.2 billion against RM1.12 billion previously.

Volatile global economic conditions and ongoing trade disputes continue to affect the performance of the Malaysian insurance industry, Teh added.

For the quarter under review, LPI’s wholly owned insurance subsidiary, Lonpac Insurance Bhd, grew its gross premium income by 0.5% to RM380 million from RM378.1 million last year.

Meanwhile, its claims incurred ratio increased to 43.6% from 37.2% reported in the previous corresponding quarter.

According to ISM Insurance Services Malaysia Bhd statistics, the general insurance industry registered a 1.7% decline in gross written premiums for the first six months of 2019.

The industry’s overall combined ratio deteriorated to 93.2% from 92.3% reported in the same period of 2018.

Lower demand for insurance, coupled with an increase in claims cost, had affected the industry’s underwriting performance.

In the Malaysian general insurance industry, Lonpac ranked third in terms of gross written premiums, with a market share of 8.6% as at end-June 2019, as per ISM data.

The group’s combined ratio for 3Q19 also deteriorated to 70.8% from 65.1% previously, while underwriting profit slipped 7.9% to RM75.7 million from RM82.2 million prior.

“This was mainly due to the unfavourable claims experience reported in medical and miscellaneous accident classes of insurance,” Teh said.

For the nine months ended Sept 30, 2019, LPI’s net profit climbed 2.5% to RM235.8 million, while profit before tax grew 1.5% to RM299.4 million from RM295.1 million registered last year.

Net return on equity increased to 12.3% for the nine-month period from 11% previously, while earnings per share improved 2.5% to 59.18 sen from 57.74 sen.

Moving forward, the group expects the rest of 2019 to remain challenging as economic conditions are not expected to improve soon.

“We have taken steps to consolidate our market position and are reviewing portfolios where performances have not been up to expectations.

“In this competitive and volatile environment, we will focus on building a sustainable portfolio that will add value to our shareholders,” it said.

Shares of LPI closed 0.1% lower at RM15.48 on Monday, valuing the group at RM6.17 billion.