LPI Capital’s 1Q20 earnings up 1%


LPI Capital Bhd’s earnings for the first quarter ended March 31, 2020 (1Q20) rose to RM77.92 million from RM77.16 million recorded a year ago, helped by a 2.1% increase in profit from the general insurance segment.

“Underwriting profit for the current quarter rose by 14.8% to RM68.4 million from RM59.6 million previously, mainly contributed by a growth in net earned premium, lower net claims incurred and net commission expenses compared to the corresponding quarter in2019,” the insurance firm told Bursa Malaysia yesterday.

Earnings per share in the three months were also higher at 19.56 sen against 19.37 sen in 1Q19, while net return on equity improved to 4.5% from 3.9% previously.

Quarterly revenue increased 2.9% year-on-year to RM403.91 million driven by a 2.6% or RM9.3 million growth in gross earned premium from the general insurance segment.

However, the company suffered fair value losses of RM8 million in their statement of profit or loss due to investments in unit trust funds, quoted equity and corporate bonds.

“The fair value losses resulted mainly from depressed prices which in turn arose from the sell-off by foreign investors for both the

equity and bond markets due to the Covid-19 pandemic and the crash of crude oil prices,” LPI group founder and chairman Tan Sri Dr Teh Hong Piow said in a statement yesterday.

For the quarter in focus, the company also registered RM155 million worth of net fair value losses from investments in quoted equity.

“We expect the volatilities to persist in the next few months but we believe the markets will ultimately reflect the fundamentals of the investments when everything stabilises,” Teh added.

LPI Capital’s wholly-owned subsidiary, Lonpac Insurance Bhd, expanded its gross premium income by 5.45% to RM486 million

in 1Q20 from RM460.89 million previously, despite the weak demand in insurance services.

Net earned premium income, however, only climbed 0.62% to RM237.11 million from RM235.64 million a year earlier, partly due to higher technical reserves.

Underwriting profit jumped 14.8% to RM68.41 million from RM59.61 million last year, helped by an unchanged management expense ratio of 22.2% and a lower commission ratio of 2.7% versus 5.2% previously.

For January to March 2020, Lonpac’s claims incurred ratio stood at 46.3%comparedto47.4%registered last year.

Pretax profit rose 1.3% to RM80.1 million from RM79.1 million reported previously partly due to fair value losses in the group’s investment.

“The Covid-19 pandemic is having a considerable economic impact as consumer and business confidence are affected in the face of uncertainties. For general insurers, the impact on claims should be relatively manageable,” Teh said.

The group will “further review its digital transformation plan” to create a “more agile and digitally-enabled business”, as it continues operating under the Movement Control Orderasanessentialfinancialser- vices provider, he added.