Teh said insurance claims have begun normalising upwards, especially in the motor and miscellaneous accident insurance segments.
KUALA LUMPUR: The Malaysian general insurance industry is facing headwinds despite the transition to endemicity amid an increase in volatility in investment returns and higher insurance claims, says LPI Capital Bhd
founder and chairman Tan Sri Teh Hong Piow.
Announcing the group’s second quarter (2Q) financial results for the period ended June 30, 2022, he said LPI’s performance was brought lower by insurance unit Lonpac Insurance Bhd as it experienced a surge in claims and poor results in its investment portfolio.
LPI posted a net profit of RM56.77mil in 2Q, on lower revenue of RM397.05mil.
On a per share basis, the group recorded earnings of 14.25 sen compared to 21.07 sen in the same quarter last year.
The board of directors declared a first interim dividend of 25 sen per share, amounting to RM99.6mil or 84.2% of the net profit attributable to shareholders.
In a statement, Teh said insurance claims have begun normalising upwards, especially in the motor and miscellaneous accident insurance segments.
Over the six-month period to June 30, the motor claims incurred ratio had surged to 82.6% from 61% in the same period in 2021, as more vehicles returned to the road and amid a growing trend in court awards for third-party bodily injury claims.
In 2Q alone, Teh said Lonpac’s net claims incurred ratio increased to 46.8% from 35.8% reported in the previous corresponding quarter.
“With the management expenses ratio at 19.8% and commission ratio maintained at 6%, Lonpac registered a higher combined ratio of 72.6% as compared to 64.3% achieved in the second quarter,” he added.
As a result, Lonpac’s underwriting profit was 21.5% lower at RM69.4mil against RM88.4mil registered in the previous corresponding quarter.
Meanwhile, Lonpac’s investment portfolio of fixed-income securities and unit trust funds reported fair value losses of RM7.3mil during the quarter as a result of rising interest rates.
Lonpac registered a pre-tax profit of RM74.9mil, 32.6% lower than RM111.2mil in the previous corresponding quarter.
However, the insurer managed to maintain its market position with a 0.7% year-on-year increase in gross premium income to RM372mil.
On the outlook, Teh said economic challenges remain with the most serious being the risk of recession as global central banks tighten monetary policies to combat runaway inflation.
“Geopolitical tensions and looming recessionary pressures add further uncertainty to the global economic recovery.
“The Malaysian economy will be impacted by lower external demand if developed global economies move into recession,” he added.
On the domestic front, the second phase of liberalisation in the insurance industry is expected to commence in the second half of 2022, which will put further pressure on premium pricing and underwriting margin.
“Nevertheless, with its emphasis on prudency in underwriting and continued product innovation, the LPI Group is confident that it will remain competitive and resilient to sustain its profitability in the liberalised environment,” said Teh.
