LPI reports profit drop as insurance claims rise

KUALA LUMPUR (Aug 2): LPI Capital Bhd’s second-quarter net profit dropped to RM56.77 million, from RM83.92 million a year earlier, as the general insurer incurred higher claims by policyholders, and as the company registered a decline in revenue on lower gross-earned premiums and investment income.

"The performance of the Malaysian general insurance industry has been affected by the volatility of return on investment instruments and the normalisation of claims experience, as the country transitions to [Covid-19] endemicity," LPI chairman and founder Tan Sri Dr Teh Hong Piow said in statement to Bursa Malaysia on Tuesday (Aug 2).

Teh, who is also the founder and chairman emeritus of Public Bank Bhd, said Malaysia’s strong economic fundamentals at this juncture allow the country to withstand the impact of a recession that may emerge in global economies.

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

According to LPI's Bursa filing, the company's revenue fell to RM397.05 million for the second quarter ended June 30, 2022 (2QFY22), from RM419.99 million a year earlier.

For the first half ended June 30, 2022 (1HFY22), cumulative net profit was down at RM118.3 million, from RM166.23 million a year earlier, as revenue slipped to RM794.78 million from RM860.78 million.

"[In quarterly terms,] for 2QFY22, the group recorded a lower profit before tax of RM73.5 million, compared with RM75.8 million for 1QFY22.

"The decrease in profit before tax for the said quarter was mainly due to lower investment income received," LPI explained.

Despite the weaker financial performance, LPI declared for 2QFY22 its first interim dividend of 25 sen a share for the financial year, compared with 29 sen a year earlier.

LPI said the dividend's ex- and payment dates fall on Aug 16 and 25 respectively.

Looking ahead, the company is mindful of factors, including a possible recession in developed economies, as the world contends with lingering Covid-19 concerns.

"Geopolitical tensions and looming recessionary pressures add further uncertainty to the global economic recovery. The Malaysian economy will be impacted by lower external demand if developed global economies move into a recession. Many countries are also bracing for the impact of another wave of Covid-19 cases, following the detection of more infectious sub-variants of Omicron," LPI said.

Despite the heightened uncertainty and volatility in the operating environment, LPI said the group will continue to strengthen its distribution channels to facilitate continued business growth.

"[In Malaysia,] the second phase of liberalisation of the insurance industry expected to commence in 2HFY22 will put further pressure on [insurance] premium pricing and underwriting margins.

"Nevertheless, with its (LPI's) emphasis on prudency in [insurance] underwriting and continued product innovation, the LPI group is confident that it will remain competitive and resilient to sustain its profitability in the liberalised environment," LPI added.

At the noon break, LPI settled down four sen or 0.29% at RM13.60, giving the company a market capitalisation of about RM5.42 billion.

LPI has 398.38 million outstanding shares, acccording to its latest quarterly financial report.