LPI Capital 1Q earnings lifted by fair value gains amid bond market recovery

KUALA LUMPUR (April 20): LPI Capital Bhd's net profit grew 14% for the first quarter ended March 31, 2023 (1QFY2023) thanks to higher investment return that was mainly contributed by fair value gains amid recovery in the bond market.

The insurer, founded by the late banking magnate Tan Sri Teh Hong Piow, posted a net profit of RM73.83 million for 1QFY2023, up from RM64.9 million a year ago, while revenue grew 11% to RM463.3 million from RM416.09 million over the same period.

Earnings per share rose to 18.53 sen for 1QFY2023 from 16.29 sen previously.

Nonetheless, LPI said wholly-owned subsidiary Lonpac Insurance Bhd’s claims performance deteriorated in 1QFY2023 with its net claims incurred ratio rising to 51.8% from 44.7% in 1QFY2022.

“With management expenses ratio at 20.1% and net commission ratio at 7.6%, Lonpac registered a higher combined ratio at 81.2% as compared to 77.0% achieved in FY2022.

“As a result, its insurance service result came in 8.4% lower at RM61.0 million [in 1QFY2023] from RM66.6 million recorded in 1QFY2022,” LPI told Bursa Malaysia in a filing on Thursday (April 20).

LPI said both the fire and miscellaneous classes of insurance reported lower insurance service results due to "higher claims frequency and quantum registered".

For 1QFY2023, the group said Lonpac’s gross written premiums expanded by 2.7% to RM489.4 million from RM476.7 million a year ago, due mainly to increases in both the fire and motor classes of insurance.

Going forward, LPI said while the resumption of full economic activities will enable it to expand through new opportunities, the expected implementation of wider phased liberalisation measures will continue to exert greater competitive pressure on the general insurance industry, resulting in new challenges.

“In response, the group will continue to identify and expand its distribution channels to reach out to a wider segment of its targeted market, and establish new streams of intermediaries to strengthen its presence,” it said.

“While high inflation rates will continue to elevate claim costs and keener competition will further compress underwriting margin, the LPI group will endeavour to further improve its market position and enhance its underwriting and claims management to ensure a better insurance service result,” it added.

Shares of LPI were trading unchanged at RM12.08 at afternoon market break on Thursday, giving it a market capitalisation of RM4.81 billion.