LPI targets 15% gross premium growth
KUALA LUMPUR: General insurer LPI Capital Bhd is targeting a 15% growth in gross written premiums to RM870 million in the current fiscal year.
Its CEO Tee Choon Yeow said growth would be boosted by new businesses referred to the company by its global strategic partners, apart from the expansion of LPI’s distribution channel and agency force.
“Net profit growth in LPI could be more than 15% (in financial year ending Dec 31, 2011 (FY11),” Tee told reporters after the AGM yesterday.
Bloomberg consensus numbers indicate that LPI’s FY11 revenue and net profit may touch RM939 million and RM167.75 million, respectively.
According to Tee, LPI’s strategic business partners comprising foreign insurance entities have no operations in Malaysia. As such they refer their clients who have set up operations in the country to LPI.
LPI’s foreign partners include Japan’s NIPPONKOA Insurance Co Ltd, US-based Chubb Group of Insurance Companies, FM Global, UK-based RSA Insurance Group Plc , and Taiwan’s Fubon Insurance Company Ltd, among others.
Shareholders of LPI Capital give a show of hands at the company’s AGM yesterday. From left are independent non-executive director Datuk Yeoh Chin Kee, company secretary Kong Thian Mee, independent non-executive co-chairman Tan Sri Thong Yaw Hong, Teh, Tee and non-executive director Tan Kok Guan.
Tee said LPI, already with 16 existing branch offices across Malaysia, is planning to establish three more entities in Perak and Pahang. As at end of last year, LPI’s agency force stood at 1,477 agents, a 4.25% rise from a year earlier, according to him.
In FY10, LPI ‘s net profit rose 9% to RM137.91 million from RM126.09 million a year earlier, while revenue climbed 8% to RM752.07 million from RM698.46 million in FY09.
Gross written premiums grew 12% to RM755.93 million from RM675.25 million while investment income fell 3% to RM60.95 million from RM62.73 million.
During the year, LPI’s dividend payout came to 55 sen a share, translating into RM118.83 million or about 87% of its net profit. This translates into a dividend yield of 4% based on the stock’s closing price of RM13.72 yesterday.
OSK Research Sdn Bhd in a recent note following the release of LPI’s FY10 financials, said the company’s earnings in FY11 could see low double-digit growth unlike the high double-digit rise posted in previous years.
This is in anticipation that the insurer would incur higher claim expenses and also taking into account the higher base effect from the company’s enlarged earnings.
The research house is mindful of the fact that dividend yields in LPI have declined due to gains in the share price of the company.
In the last six months, LPI shares rose from a low of RM11.32 on Nov 15, 2010 to a high of RM14.18 on Jan 6, 2011.
Based on its closing price of RM13.72 yesterday, the stock was trading at a price-to-earnings multiple of 22 times versus the industry’s average of 12 times.
Tee said based on the company’s cash position and level of operations, it was “not difficult” to initiate a similar dividend payout in FY11 compared with FY10.
On the substantial increase in LPI’s cash pile, Tee said this was due to changes in accounting regulations which required the company’s fixed deposits with banks for durations of three months and below be categorised as cash and cash equivalents.
LPI’s cash pile had grown to RM600 million as at Dec 31 last year compared with RM221.41 million a year earlier. Fixed deposits with local banks made up the largest chunk of RM532.87 million, LPI’s annual report showed.
Worth noting is LPI’s overseas expansion when it adopted an early-bird strategy in which the insurer established its 45%-owned CampuBank Lonpac Insurance Plc in Cambodia in August 2007, leveraging on Public Bank Bhd’s branch network and existing clientele in the Indochina nation.
Public Bank chairman Tan Sri Teh Hong Piow, who is also the chairman of LPI, is the single-largest shareholder in LPI with a 44.4% stake.
According to Tee, the insurance landscape in Cambodia has changed with the entry of more players now. As such, LPI is ensuring that its pricing strategy is competitive to sustain its business there.
“We cannot have a short-term view (on LPI’s business strategy in Cambodia),” Tee said.
Other than Cambodia, LPI also has operations in Singapore.
On LPI’s expansion mode, Tee said LPI would consider acquiring life insurance companies. The acquisition has to add value to the buyer, he said.
This article appeared in The Edge Financial Daily, February 25, 2011.
