Harimau Capital

Commenting on the Group’s performance, Tan Sri Dato’ Sri Dr. Teh Hong Piow, Founder and Chairman of the Group said,  “2011 has been a challenging year, dominated by global macroeconomic issues ranging from the downgrade of the US credit rating to concerns over the Euro zone debt crisis and the exceptionally high severity and frequency of natural catastrophes, particularly the floods experienced in several locations in the country. We are, however, not exposed to the floods in Thailand, other than a few supplier extension covers, which are immaterial to our results."

Tan Sri Teh noted, “Despite these exceptional events, Lonpac still managed to chalk up an impressive underwriting profit of RM137.9 million as compared to RM116.7 million recorded last year, showing a commendable increase of 18.2%”. "Our results were nevertheless negatively impacted by the huge losses incurred by the Malaysian Motor Insurance Pool (MMIP), which was formed to cater for unplaced motor risks.  All licensed general insurers have an equal share of participation in the pool. Our share of loss through the MMIP was RM11.1 million. This resulted in an increase in our motor loss ratio to  81.1% and dampened underwriting profits," he said. 

He further added, “Regardless of this misfortune Lonpac registered a respectable fourth quarter underwriting profit of RM40.4 million.  Excluding this unprecedented and exceptional loss, Lonpac’s underwriting profit for the year would have been RM149.0 million or an increase of 27.7%. Similarly the Group’s pre-tax profit would have been RM211.2 million, an increase of 16.5%”. "Against this difficult backdrop, the Group still achieved an impressive growth rate of 20.1% in both revenue and gross premium income," said the Chairman.  He continued, “The current volatile investment environment and turbulent equity market have no significant adverse effects on our investments.  Our investment in the equity market has instead appreciated by  2.6% to RM773.1 million.”

The Chairman said, "Lonpac's success reflects the robustness of the company's diversified business model and justifies our controlled appetite for risk acceptance.  Lonpac continues to exercise and enjoy a culture that is driven by a strong conviction and a narrowed focus on underwriting discipline and good risk management.”

HIGHLIGHTS OF THE GROUP’S PERFORMANCE FOR THE FOURTH QUARTER AND THE YEAR UNDER REVIEW :                                                         

Strong Profit Performance

Tan Sri Teh highlighted, “The increase in underwriting profits generated by Lonpac was the key driver to the Group recording a higher pre-tax profit of RM52.0 million for the quarter under review, and correspondingly, a pre-tax profit of RM200.1 million for the whole year 2011.  Net profit attributable to shareholders rose by 12.0%, from RM137.9 million to RM154.5 million.  The Group’s earnings per share increased to 70.1 sen per share as compared to 63.8 sen achieved last year”.

Strong Momentum in Revenue and Premium Growth

The Group’s revenue grew by 20.1% to RM902.7 million.  Likewise, gross premium income also registered a significant increase of 20.1% from RM755.9 million to RM907.9 million written by Lonpac.

Regarding the growth rate,  Tan Sri Teh said, “ The Group’s strong balance sheet and effective capital allocation process provide us with the necessary flexibility to appropriately direct and deploy resources to business lines that are profitable.   Our attention to quality risk selection and management remained undiminished.  This in turn translated into an underwriting surplus in all classes of insurance we underwrote.”

Good Corporate Governance and Strong Ratings

The Chairman stressed that, “The Group’s commitment to enhancing shareholder value through good corporate governance was duly recognised by the conferment of several awards during the year, notably by the Minority Shareholder Watchdog Group for the Most Prompt AGM Award and Distinction Award on the Malaysian Corporate Governance Index 2011. Its strong management of assets and liabilities and stringent internal control in managing its operations earned an “A-“ (excellent) rating and an issuer credit rating of “a-“ from AM Best, an international rating agency”. “The ratings signify the Group’s financial strength and reliability to the insuring public.  They also reflect the Group’s ability to maintain a favourable underwriting performance, even in the challenging environment forecast for the year,” continued Tan Sri Teh.

Dividend Payment

Tan Sri Teh announced that, “In view of the Group’s encouraging performance, a second interim single tier dividend of 50 sen has been declared by the Board”.

“The higher second interim dividend payment which amounted to RM110.2 million is part of the Group’s endeavour to reward its shareholders.  The total net dividend paid and payable for the year is RM165.2 million”, emphasised Tan Sri Teh.

Future Prospects

“The challenges facing the global developed economies are rising rapidly with  very little evidence to suggest that there will be an imminent solution to address these concerns.  Nevertheless, the outlook for the Malaysian economy remains positive amidst support from accommodative fiscal and monetary policies implemented by the government.  For 2012, the economy is expected to grow by 5% to 5.5% and the insurance industry is likely to remain resilient”, said Tan Sri Teh.

"However," continued Tan Sri Teh, "the number of significant catastrophes which occurred in 2011 poses a future test for the insurance industry.  Reinsurance placements will be difficult and rates are expected to rise. On the upside, the Group’s robust business plan and strong balance sheet, which are built on a broad foundation, have positioned us to respond innovatively even in a persistently challenging market. We will continue to assess all business opportunities with the objective of maximising long term shareholder value.  Barring unforeseen circumstances, the Group is confident it will maintain its earnings momentum and deliver a satisfactory performance”.