This article first appeared in The Edge Financial Daily on October 16, 2019

KUALA LUMPUR: LPI Capital Bhd's net profit fell 4.35% year-on-year (y-o-y) to RM87.82 million in the third quarter ended Sept 30, 2019 (3QFY19) from RM91.81 million, mainly due to higher claims incurred and lower interest income received. The weaker earnings came despite higher revenue achieved.

This resulted in lower earnings per share of 22.04 sen for 3QFY19, versus 23.04 sen for 3QFY18, its stock exchange filing showed.

Revenue grew 8.51% to RM423.84 million from RM390.59 million, mainly driven by growth in gross earned premium of 9.1% or RM32.4 million from its general insurance segment.

For the cumulative nine months ended Sept 30, 2019, net profit rose 2.48% y-o-y to RM235.76 million from RM230.05 million, while revenue gained 7.01% y-o-y to RM1.2 billion from RM1.12 billion, as its general insurance revenue grew 7.1% to RM1.17 billion from RM1.09 billion.

In a statement, LPI founder and chairman Tan Sri Teh Hong Piow said the volatile global economic conditions and ongoing trade disputes continue to affect the performance of the Malaysian insurance industry.

Citing statistics from the Insurance Services Malaysia Bhd, LPI said its subsidiary Lonpac ranked third in terms of gross written premium in Malaysian general insurance industry, with an 8.6% market share as at June 30, 2019.

"The general insurance industry registered a 1.7% decline in gross written premium for the first six months of 2019 and the industry's overall combined ratio had deteriorated to 93.2% from 92.3% reported in the same period of 2018.

"The lower demand in insurance, coupled with an increase in claims cost had affected the underwriting performance of the industry," he said .

For Lonpac, its combined ratio for the third quarter of 2019 also deteriorated to 70.8% from 65.1% previously, while its underwriting profit declined by 7.9% to RM75.7 million from RM82.2 million. This was mainly due to the unfavourable claims experience reported in medical and miscellaneous accident classes of insurance.

For the nine-month period under review, Lonpac's claims incurred ratio deteriorated to 45.2% from 41.6% previously, while its combined ratio increased to 72% from 68.7%. With the higher claims reported, Lonpac's underwriting profit was 1.9% lower at RM208.3 million from RM212.4 million in the previous corresponding period.

LPI expects the remaining period of 2019 to remain challenging, saying economic conditions are not expected to improve soon.

"We have taken steps to consolidate our market position and are reviewing portfolios where performances have not been up to expectation. In this competitive and volatile environment, we will focus on building a sustainable portfolio that will add value to our shareholders," LPI's filing stated.

LPI's shares closed two sen lower at RM15.48, bringing it a market capitalisation of RM6.17 billion.