PETALING JAYA: LPI Capital Bhd’s net profit for the fourth quarter ended Dec 31, 2021 fell 23.2% to RM73.07 million from RM95.23 million a year ago as the performance of the group was affected by the normalisation of claims ratios with the easing of the lockdowns and the re-opening of the economy.
The year-end flooding disaster and lacklustre performance of the fixed income unit trusts had also contributed to the lower profit of the group.
However, revenue improved 1.6% to RM429.04 million from RM422.38 million achieved in the previous corresponding period.
For Q4’21, the group’s wholly owned insurance subsidiary Lonpac Insurance Bhd, reported an increase in its claims incurred ratio to 37.7% from 34.4% in the corresponding quarter in FY20. Generally, all major classes of insurance reported an increase in their claims incurred ratio as economic activities resumed and movement restrictions eased in the last quarter of the year. The floods in December also contributed partly to the increase in claims incurred ratio with Lonpac receiving more than 1,300 flood claims intimations as at Dec 31, 2021.
With management expense ratio at 18.3% and commission ratio at 6.8%, Lonpac had despite the increase in claims incurred ratio, managed to register a combined ratio of 62.8% for the Q4’21. The combined ratio had, however, increased from the low of 58.7% achieved in the previous corresponding quarter. With the higher combined ratio, Lonpac reported an underwriting profit of RM95.3 million which is 15.4% lower than the RM112.7 million registered in FY2020.
Pretax profit of Lonpac for Q4’21 was also affected by reduced investment income and higher fair value loss on investment, reported at RM99.1 million which is 20.1% lower than the RM124.1 million registered in the previous corresponding quarter.
For the full year, LPI’s net profit increased 2.4% to RM344.68 million from RM336.73 million a year ago. LPI registered a 5.9% increase in revenue to RM1.72 billion from RM1.62 billion achieved in FY2020, mainly due to higher gross earned premium which contributed 93.8% to the total operating revenue in FY2021.
Group chairman Tan Sri Dr Teh Hong Piow (pix) said despite the various challenges encountered, triggered mainly by the prolonged pandemic, the group remained resilient and continued to report satisfactory performance in FY2021.
For FY2021, LPI’s net return in equity was reported at 16.1% while its earnings per share improved to 86.52 sen from 84.52 sen.
For FY2021, Lonpac reported a 4.9% lower pretax profit of RM397 million as compared against RM417.6 million achieved in FY2020, partly due to the poor performance of its fixed income unit trusts investment as the increase in bond yields during the year had lowered the valuation of the unit trust investment. In FY2021, Lonpac booked in net fair value loss of RM46.1 million for its investment as compared to net fair value gain of RM1.5 million reported in FY2020. However, Lonpac registered a strong underwriting performance, especially in the first three quarters of the year.
Its claims incurred ratio for the FY2021 registered a lower 36.5% as compared to 41.2% reported in FY2020. With management expense ratio at 19.8% and commission ratio of 6.1%, Lonpac reported a combined ratio of 62.5% for FY2021 as compared to 66.6% achieved in FY2020. As a result, the underwriting profit of Lonpac improved by 12% to RM379.7 million from RM338.9 million.
Despite facing operational challenges during the year arising from movement restrictions under various stages of MCOs, Lonpac had sustained its business portfolio and registered a marginal 0.7% increase in its gross premium income to RM1.56 billion from RM1.55 billion reported in FY2020. Lonpac managed to increase its market share with gross premium income having improved by 5.8% to RM363.0 million from RM343.1 million.
The board has declared a second interim dividend of 45 sen per share (FY2020: 44 sen). Together with the first interim dividend of 29 sen per share (FY2020: 28.0 sen) amounting to RM115.5 million which was paid in September 2021, the proposed total dividend payout for FY2021 is RM294.8 million representing 85.5% (FY2020: 85.2%) of the group’s net profit and a 2.8% increase from the total RM286.8 million paid in FY2020.