LPI Capital Q3 net profit down marginally on higher tax expense

October 10, 2018 | By | Reply More

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PETALING JAYA: LPI Capital Bhd’s (LPI) net profit for the third quarter ended Sept 30, 2018 was marginally lower on higher tax expense, at RM91.8 million, compared with RM92.2 million for the same period in 2017.

Profit before tax however was 1.4% higher at RM116.6 million, compared with RM115.0 million for the previous corresponding quarter on higher net earned premium and lower net claims incurred and other expenses.

This was on almost 4% lower operating revenue of RM390.6 million, compared with RM406.8 million for the same period in 2017.

Its net return on equity was lower at 4.4% with a larger equity base and earnings per share at 23.04 sen.

Lonpac Insurance Bhd’s net earned premium income for the quarter under review, increased by 1.6% from RM231.5 million to RM235.2 million due to higher retention and lower reinsurance outward.

Underwriting profit for the third quarter of 2018 was lower at RM82.2 million from RM83.6 million reported previously mainly due to higher provision of technical reserve, higher management expense ratio at 20.2% and higher net commission ratio at 7.7%.

“ “2018 continues to be a challenging year for the Malaysian general insurance industry as the global economic condition remains volatile affecting the economic prospects of the emerging markets. 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 6 months of 2018,” LPI founder and chairman Tan Sri Teh Hong Piow said in a statement.

He said as an active player in the insurance of infrastructure projects, Lonpac was also affected by the slowdown in the implementation of such projects.

“The liberalisation process for the insurance industry 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,” he added.

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. The group will continue to focus on improving quality standards and operational efficiency in order to prepare for the new competitive landscape. Investment on technology is ongoing to build alternative channels of distribution.

For the nine months period ended Sept 30, 2018, LPI’s profit before tax registered an 0.7% increase from RM293.0 million reported in the previous corresponding period to RM295.1 million while its net profit maintained at RM230 million.

Revenue improved marginally by 1.6% to RM1.12 billion from RM1.11 billion previously. Its net return on equity for the first 9 months of 2018 recorded 11.0% while it achieved 57.74 sen in earnings per share.

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