LPI Capital 3Q net profit falls 29% on lower profit from general insurance segment

KUALA LUMPUR (Oct 17): LPI Capital Bhd's net profit for the third quarter ended Sept 30, 2022 (3QFY22) fell 29.07% to RM74.75 million from RM105.38 million a year ago, on lower profit from its general insurance segment, which decreased by 24.4% to RM88.1 million from RM116.6 million in 3QFY21.

Additionally, underwriting profit for the current quarter decreased by 30.5% or RM31.7 million to RM72.2 million from RM103.9 million previously mainly due to lower net earned premium and higher net claims incurred as well as higher management expenses.

Earnings per share were down at 18.77 sen from 26.45 sen previously, its Bursa Malaysia filing on Monday (Oct 17) showed.

Quarterly revenue however increased marginally to RM429.64 million from RM427.91 million in the same period a year ago, driven by growth in gross earned premium of 0.8% or RM3 million from its general insurance segment.

Its investment holding segment also recorded higher revenue of RM17.2 million compared with RM16.5 million, thanks to higher dividend income received.

For the cumulative first nine months ended Sept 30, 2022 (9MFY22), LPI Capital's net profit dropped 28.93% to RM193.04 million from RM271.61 million in 9MFY21, as revenue slipped 4.99% to RM1.22 billion from RM1.29 billion.

Looking ahead, LPI Capital said the Malaysian economy is expected to remain buoyant this year, supported by strong domestic demand on the back of the reopening of the economy.

However, it noted there may be downside risks to outlook next year due to global inflation and monetary policy tightening by central banks which could impact respective countries' growth prospects.

"Malaysia will not be spared if a global economic slowdown happens, given that it is an open economy and relies heavily on exports. However, continued growth in domestic spending and business activities would help to cushion the potential impact of external demand slowdown," said LPI Capital chairman and founder Tan Sri Dr Teh Hong Piow.

Meanwhile, LPI Capital observed the country's general insurance industry is expected to gradually shift towards a fully market-based pricing for fire and motor insurances as Phase 2a of the market liberalisation plan kicks off in 4QFY22.

It said higher claims, which are normalising after the reopening of the economy, and the continued market liberalisation, which will exert pressure on the pricing for fire and motor products, will be the main challenges for Malaysian general insurers moving forward.

"Despite Malaysia having registered an impressive economic growth in the first half of 2022, the performance of Lonpac Insurance Bhd, the group's wholly owned insurance subsidiary, continued to be impacted by higher claims incurred ratio as business and social activities resumed to pre-pandemic levels," added Teh.

At noon break on Monday, LPI Capital's share price was down eight sen or 0.64% to RM12.36, bringing a market capitalisation of RM4.92 billion.