LPI Capital reports net profit of RM61.5 million in first quarter

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PETALING JAYA: LPI Capital Bhd recorded a net profit of RM61.53 million in the first quarter ended March 31, 2022 (Q1’22), down 25.3% from RM82.31 million in the same quarter of the previous year due to lower investment income and reduced profitability at its wholly-owned insurance subsidiary, Lonpac Insurance Bhd (Lonpac).

It recorded revenue of RM397.74 million in the quarter, down 9.8% from RM440.79 million in the same quarter a year earlier, mainly due to the decrease in gross earned premiums recorded in Q1’22.

Tan Sri Group Chairman Dr Teh Hong Piow (picture) said that while business sentiment has turned positive year-to-date, LPI Group has had a slow start to FY2022 (FY2022) with the group’s performance impacted by a higher claims ratio and the lackluster performance of its investment portfolio.

For the quarter, the group reported investment income of RM28.7 million, down 33.7% from the RM43.3 million recorded in Q1’21, mainly due to lower revenue dividends received from group equity investments. Its net return on equity was 2.9% while earnings per share fell 25.3% to 15.44 sen from 20.66 sen.

“Lonpac’s profitability for the first quarter of 22 was partly impacted by the additional costs of RM6.4 million incurred for reinsurance reinsurance restoration following the major floods last December. Lonpac’s performance in Q1’22 was also affected by the increase in its technical reserve. Its net unearned premium (UPR) reserve increased by RM54.4 million for the quarter, compared to an increase of RM42.9 million in Q1’21.

“The increase in UPR was due to the adoption of a more conservative approach in the formula for calculating UPR for Lonpac’s mortgage-related personal accident insurance portfolio, which resulted in an additional net UPR of RM14.8 million recognized. Normalization of loss ratios arising from the reopening of the economy and increased business and social activities also contributed to higher claims and lower underwriting profit for Lonpac,” Teh said in a statement. .

Lonpac’s incurred claims ratio for Q1’22 increased to 46.9% from 39.0% in the corresponding period of the prior year. With a higher management expense ratio at 25.6% and a commission ratio at 3.3%, Lonpac saw its combined ratio increase to 75.8% from 63.5% in Q1’21. As a result, underwriting profit for the reporting period decreased by 43.0% to RM52.6 million from RM92.2 million in Q1’21.

For the quarter under review, Lonpac’s gross premium income increased by 1.3% to RM476.6 million from RM470.7 million in Q1’21. However, its net earned premium income of RM217.2m was 14.0% lower than RM252.5m in Q1’21 due to higher UPR and higher reinsurance. raised at T1’22.

“As the economy reopens and business activities resume, demand for insurance is expected to increase. Although LPI Group faced headwinds in its performance for the first quarter of 2022, the Group is confident that with its strengthened distribution channel and concerted efforts in executing its business plan, LPI will be able to show satisfactory performance for the remainder of fiscal year 2022,” Teh mentioned.

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