LPI Capital Q2 net profit rises to RM77.4m backed by higher general insurance contribution

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LPI Capital Bhd saw its net profit increase by 9.4% to RM77.4 million for the second quarter ended June 30 (Q2’20), compared with a net profit of RM70.78 million for the same quarter of the previous year on the back of higher profit from its general insurance segment and a smaller loss in its investment holding segment despite a lower underwriting profit.

Net return on equity of LPI for the quarter improved to 4.2% from 3.4% while its earnings per share registered 19.43 sen, increased from 17.77 sen.

Revenue for the quarter stood at RM399.55 million, a 3.3% gain from RM386.9 million previously.

Lonpac Insurance Bhd, the wholly owned insurance subsidiary of LPI, reported a 7% decline in its gross premium income to RM340.9 million for Q2’20, from RM366.6 million recorded in the previous corresponding quarter, affected by lower premium written for the motor, marine, oil & gas and miscellaneous classes of insurance.

For the six-month period, its net profit rose by 5% to RM155.32 million, from RM147.94 million reported previously. The period saw its revenue grow by 3.1% to RM803.45 million from RM779.6 million.

Despite the interruption to business activity, Lonpac managed to sustain its performance for the first six months of the financial year, with its gross premium income contracting by only 0.1% to RM826.9 million. Marine and oil & gas classes of insurance recorded the biggest drop in premium written due to slowdown in marine shipments and drop in oil prices.

Lonpac also reported a 5.5% increase in its underwriting profit to RM139.9 million from RM132.6 million achieved in the first half year of 2019. Profit before tax of Lonpac for the period under review increased by 4.8% to RM180.9 million from RM172.6 million.

LPI has declared a first interim dividend of 28 sen per share totalling RM111.5 million, which represents 71.8% of its net profit.

The group told the bourse that the country is making good progress in its fight against the Covid-19 pandemic, but there is still a high degree of uncertainty on global recovery as long as a vaccine is not available and fear of a second wave of infections.

In regard to its outlook, LPI said it is poised to pursue growth and business opportunities when the business environment improves.

LPI’s chairman and founder, Tan Sri Dr Teh Hong Piow, commented that consumers’ confidence and business sentiment are badly affected as the pandemic has triggered disruptions in demand-supply dynamics and breakdown in economic activities, thus threatening a global recession.

“Operating in such an unprecedented period of volatility, the group was affected by the lockdown imposed during the various phases of movement control order (MCO) and the disruption of business activities,” he said in a press release.

Nevertheless, he said, the group will remain vigilant for the rest of 2020 and will continue to support its process re-engineering and business enhancements programmes leveraging on technology. Meanwhile, it will focus on sustainable revenue streams, further strengthening its risk management capabilities and intensifying cost management measures.