Thursday 28 Mar 2024
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KUALA LUMPUR (April 15): LPI Capital Bhd's net profit for the first quarter ended March 31, 2021 (1QFY21) rose 5.64% to RM82.31 million from RM77.92 million last year, thanks to higher dividend incomes from equity investments.

In a bourse filing, its earnings per share improved to 20.66 sen for 1QFY21 from 19.56 sen a year before.

Revenue for the quarter came in at RM440.79 million, increasing by 9.13% from RM403.91 million a year earlier.

On a quarter-on-quarter basis, however, the company's net profit came in 13.57% lower compared with RM95.23 million in 4QFY20, despite recording a higher revenue against RM422.38 million.

Commenting on the 1QFY21 results, its group chairman Tan Sri Teh Hong Piow said the performance of its insurance arm, Lonpac Insurance Bhd, was affected by the recent surge in bond yields, which resulted in lower bond valuations.

For the quarter under review, Lonpac Insurance reported a fair value loss of RM34.6 million in its fixed-income unit trust investments, compared to the RM6.2 million fair value loss in the previous corresponding quarter.

As a result, its profit before tax was affected by this provision and closed 11.7% lower year-on-year at RM70.7 million for 1QFY21 from RM80.1 million.

"We believe the fixed income unit trust investment is still a viable investment in the long term and the valuation will be adjusted once the yields return to normal," said Teh in a separate press statement.

According to Teh, the restrictive measures imposed by the Movement Control Order (MCO) 2.0 in mid-January affected its business development initiatives as Lonpac reported a 3.1% lower gross premium income of RM470.7 million for 1QFY21 compared to RM486 million registered in the previous corresponding period.

In addition, both direct/corporate clients and broking channels reported a drop in gross premium income for the quarter.

However, Lonpac's net earned premium income improved by 6.5% to RM252.5 million from RM237.1 million, partly due to some release of unearned premium reserve.

Meanwhile, Lonpac continued to register strong underwriting performance with its underwriting profit improving by 34.8% to RM92.2 million for 1QFY21 from RM68.4 million reported a year before, partly due to lower claims incurred ratio at 39% compared to 46.3% registered previously.

With management expenses at 19.7% of net earned premium and commission ratio at 4.8%, Lonpac's combined ratio, which measures the profitability of its underwriting operation, registered a commendable 63.5% compared to 71.2% recorded in 1QFY20.

On the group's prospects, Teh said with the easing of MCO, improving global demand and better business and consumer sentiments, a gradual return to normalisation is set to boost demand for insurance.

"The implementation of Budget 2021 with the various stimulus measures, the launching of digital infrastructure and connectivity and the continuation of large-scale government projects will also provide the necessary uplift for investment and growth," he added.

However, he is being cautious that a delay in the mass vaccination programme may result in another resurgence of infection cases and a further delay in the opening of borders may limit the potential for a full recovery.

LPI shares rose two sen or 0.14% to RM13.90, bringing it a market capitalisation of RM5.54 billion at 3pm. There were 62,800 shares traded.

Edited ByLam Jian Wyn
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