LPI Capital’s net profit rises 5.6%

The company’s revenue for the quarter also increases 9.13% YoY to RM440.8m from RM404m last year


LPI Capital Bhd’s net profit for the first quarter ended March 31, 2021 (1Q21), rose 5.64% year-on-year (YoY) to RM82.31 million from RM77.92 million, contributed by higher dividend incomes from equity investments.

The company’s revenue for the quarter also increased 9.13% YoY to RM440.79 million from RM403.91 million, its filing to Bursa Malaysia showed. Earnings per share for the period improved to 20.66 sen from 19.56 sen a year before.

On a quarter-on-quarter basis, the group’s net profit fell 13.57% compared to RM95.23 million in 4Q20, despite registering higher revenue of RM422.38 million.

For the quarter under review, LPI Capital’s insurance arm Lonpac Insurance Bhd reported a fair value loss of RM34.6 million in its fixed-income unit trust investments compared to RM6.2 million fair value loss in the previous corresponding quarter.

Its pretax profit was 11.7% lower at RM70.7 million versus RM80.1 million in the previous quarter.

LPI Capital group chairman Tan Sri Teh Hong Piow (picture) attributed the company’s results to the resurgence of Covid-19 infections and the implementation of Movement Control Order (MCO) which prevented normal business operations, especially face-to-face interactions with potential customers.

He said the performance of its insurance arm, Lonpac Insurance, was affected by the recent surge in bond yields, which resulted in lower bond valuations.

“We believe the fixed income unit trust investment is still a viable investment in the long term and the valuation will be adjusted once the yields return to normal,” he said in a separate statement yesterday.

Teh added that the restrictive measures imposed by the MCO 2.0 in mid-January affected its business development initiatives as Lonpac reported a 3.1% lower gross premium income of RM470.7 million for 1Q21 compared to RM486 million registered in the previous corresponding period.

In addition, both its direct and corporate clients, and broking channels reported a drop in gross premium income for the quarter. Lonpac’s net earned premium income improved by 6.5% to RM252.5 million from RM237.1 million, partly due to some release of unearned premium reserve.

Teh said as a result of maintaining prudent underwriting practices, Lonpac continued to register strong underwriting performance with its underwriting profit improving by 34.8% to RM92.2 million for 1Q21 from RM68.4 million reported a year before.

He said this was partly due to the lower claims incurred ratio at 39% compared to 46.3% registered previously.

With management expenses at 19.7% of net earned premium and commission ratio at 4.8%, Lonpac’s combined ratio, which measures the profitability of its underwriting operation, registered a commendable 63.5% compared to 71.2% recorded in 1Q20.

On prospects, Teh expects a gradual return to normalisation, backed by the easing of the MCO, improving global demand, and better business and consumer sentiments to boost demand for insurance.

“The implementation of Budget 2021 with the various stimulus measures, launching of digital infrastructure and connectivity, and continuation of large- scale government projects will also provide the necessary uplift for investment and growth.

“However, a delay in the mass vaccination programme may result in another resurgence of infection cases and a further delay in opening of borders may limit the potential for a full recovery,” he added.

At close yesterday, shares of LPI Capital ended two sen or 0.14% higher at RM13.90, valuing the company RM5.54 billion.