LPI 2Q net profit down 47.8%, declares 25 sen dividend 

The insurance company says its profit from the general insurance segment decreased by 32.5% to RM75m from RM111m in 2Q21


LPI Capital Bhd’s net profit in the second quarter ended June 30, 2022 (2Q22), fell 47.82% to RM56.77 million from RM83.92 million a year ago, dragged by lower profit from the general insurance segment.

In a filing to Bursa Malaysia today, the insurance company said its profit from the general insurance segment decreased by 32.5% to RM75.4 million from RM111.7 million in 2Q21.

Its revenue for the quarter dropped 5.46% to RM397.05 million from RM419.99 million previously, driven by a lower gross earned premium of 4.9% or RM19.7 million from its general insurance segment.

Consequently, the group’s earnings per share fell to 14.25 sen from 21.07 sen a year earlier.

Meanwhile, LPI said its underwriting profit for the current quarter decreased by 21.5% or RM19 million to RM69.4 million from RM88.4 million previously mainly due to the higher net claims incurred compared to 2Q21.

The investment holding segment also recorded a higher loss before tax of RM1.9 million compared to RM1.8 million in 2Q21 mainly due to lower interest income received during 2Q22.

For the first half ended June 30, 2022 (1H22), LPI’s cumulative net profit declined to RM118.3 million from RM166.23 million a year earlier, as revenue slipped to RM794.78 million from RM860.78 million.

Despite the lower profit, the group has declared a first interim dividend of 25 sen per share, compared to 29 sen a year ago.

Looking ahead, LPI said geopolitical tensions and looming recessionary pressures add further uncertainty to the global economic recovery, adding that the Malaysian economy will be impacted by lower external demand if developed global economies move into recession.

The group noted that many countries are also bracing for the impact of another wave of Covid-19 cases following the detection of more infectious subvariants of Omicron.

“Despite the heightened uncertainty and volatility of the operating environment, the group will continue to strengthen its distribution channels and tighten its underwriting policy to facilitate continued growth and improved underwriting performance.

“The second phase of liberalisation of the insurance industry expected to commence in 2H22 will put further pressures on premium pricing and underwriting margin.

“Nevertheless, with its emphasis on prudency in underwriting and continued product innovation, LPI is confident that it will remain competitive and resilient to sustain its profitability in the liberalised environment,” it said.

In a separate press statement, LPI chairman and founder Tan Sri Dr Teh Hong Piow (picture) said the performance of the Malaysian general insurance industry has been affected by the volatility of returns on investment instruments and the normalisation of claims experience, as the country transitions to endemicity.

Given the above, he said the performance of Lonpac Insurance Bhd, the group’s wholly owned insurance subsidiary, had been impacted by a surge in claims and the poor results of its investment portfolio.

Nevertheless, Teh said Malaysia’s strong economic fundamentals at this juncture allow it to withstand the impact of recession that may emerge from global economies.

“The reopening of all economic sectors is expected to fuel economic growth but the outlook continues to be very challenging,” he added.

Shares of LPI closed 30 sen or 2.2% lower at RM13.34 today, giving it a market capitalisation of RM5.31 billion.