This article first appeared in The Edge Financial Daily on October 11, 2018

KUALA LUMPUR: LPI Capital Bhd’s net profit saw a marginal 0.4% drop to RM91.81 million in the third quarter ended Sept 30, 2018 (3QFY18) from RM92.17 million a year ago, on lower revenue.

Earnings per share were also lower at 23.04 sen for 3QFY18 compared with 23.14 sen for 3QFY17.

Quarterly revenue fell 4% to RM390.59 million from RM406.79 million in 3QFY17, mainly driven by a 5.5% decline in gross earned premium from its general insurance segment.

“The decline in gross earned premium was mainly due to a one-off release of unearned premium reserves of RM54.5 million recorded in the previous year arising from change in accounting estimate for provision of unearned premium,” it said in a filing with Bursa Malaysia yesterday.

For the cumulative nine months (9MFY18), LPI’s net profit also fell by a marginal 0.3% to RM230.05 million from RM230.8 million a year ago, even though revenue increased 1.6% to RM1.12 billion from RM1.11 billion in 9MFY17.

LPI said its performance was contributed mainly by its wholly-owned insurance unit Lonpac Insurance Bhd with its underwriting performance. However, Lonpac’s underwriting profit reduced marginally to RM212.4 million in 9MFY18 from RM212.6 million in 9MFY17.

In a separate statement, LPI founder and chairman Tan Sri Dr Teh Hong Piow said 2018 continues to be a challenging year for the Malaysian general insurance industry as the global economic condition remains volatile.

“On the domestic front, the property market has not recovered from its oversupply and weak demand position while major infrastructure projects have been under review, affecting the demand for general insurance. As a result, the Malaysian general insurance industry reported a mere 0.7% growth in its gross premium written for the first six months of 2018,” he said.

Teh noted that Lonpac was similarly affected by the slower growth of the industry as it registered a lower gross premium income for 3QFY18 at RM378.1 million compared with RM416.6 million a year ago.

“As an active player in the insurance of infrastructure projects, we were also affected by the slowdown in the implementation of such projects,” he said.

Teh also pointed to the liberalisation process for the insurance industry, which he said has put pressure on pricing, especially on the more profitable fire portfolio of business.

“As a major player in fire insurance, Lonpac has responded to the competition with new innovative products priced competitively and will work to further strengthen our market leadership in this portfolio.

“Bank Negara Malaysia is currently reviewing the outcomes of the second phase of the phased liberalisation of motor and fire tariffs, which started in 2016, as it prepares to launch the next phase of liberalisation,” he said.

On LPI’s part, the group will continue to focus on improving quality standards and operational efficiency in order to prepare for the new competitive landscape. “Investment in technology is ongoing to build alternative channels of distribution,” added Teh