CORPORATE NEWS

LONPAC CONTINUES TO MAINTAIN PROFITS

Lonpac Insurance Bhd, a wholly-owned subsidiary of LPI Capital Bhd, appears to have struck its target in terms of year-on-year consistency in business results.

The general insurer generated more than 90% of the RM30.9mil operating profits made by LPI Capital for the whole of last year.

Lonpac chief executive officer Tee Choon Yeow told Star Business this after the release of the company's latest financial results last week.

According to Tee, the company had five years of consistent profits that had been maintained in spite of very difficult operating conditions.

Elaborating on the consistency factor, Tee said the RM30mil profit mark had been maintained for a considerably long period, something that had meant a lot to the business morale.

In providing details on LPI Capital's five-year profit (before tax), Tee said that in 1996 the figure stood at RM32.6mil while in 1997 it was at RM36.7mil.

For the 1998 and 1999 financial years, pre-tax profits were at RM32.4mil and RM34.4mil respectively, and for last year it was RM30.9mil.

The latest results also show the total assets of the holding company remain, if anything, solid.

As of December last year, total assets stood at around RM382.1mil, a figure which is expected to show greater improvement in the coming years with new strategies being put in place.

"In spite of the weak investment conditions, our investment portfolio remains strong, standing at around RM330.4mil," Tee said.

He said that among LPI Capital's equity investments, the market value of quoted securities showed an appreciation of RM69.2mil against its book value as at Dec 31, 2000.

Asked how Lonpac is going to deal with vagaries of the local stock market since the company also has a considerable investment in it, Tee said "Lonpac will continue to invest in shares that had proven to be not just profitable but also beneficial to shareholders in the long term."

Describing Lonpac as a conservative stock market player, Tee, who joined the company in 1980, said that it would review its position from time to time with focus on the movement of good chips.

"In 1999, we implemented several prudent underwriting policies that have produced satisfactory results," Tee said.

Prior to 1998, the company had foreseen a rise in crime-related losses such as thefts of vehicles, robberies, burglaries and financial related losses such as fidelity and performance bond claims.

Among the noteworthy measures taken to reduce the risk exposure were more comprehensive underwriting approaches when it came to terms and conditions.

"We also made a detailed study of those companies that managed risks better than their counterparts in the general insurance industry," Tee said.

What Lonpac did was to place more focus on such specific risks when doing business.

Tee said that greater scrutiny and risk improvement were required from our insured, especially those that sought insurance coverage where the risk had greater exposure.

"We insisted on stringent conditions when underwriting non-tariff classes of business," he said.

Tee said that because of the intense competition in the general insurance industry, rates especially those of non-tariff classes, had been substantially eroded.

"We have had in the light of such a negative development to review our earlier approach which was to emphasise on just premium growth," he said.

In spite of the growing competition, premium growth has seen a visible improvement and according to latest statistics it has grown from RM172mil (from 1999 to 2000) to RM190mil, recording a nearly 11% growth.

One source of motivation for Tee is that Lonpac had set a 10% premium growth for the last financial year and it was able to achieve it in spite of rising odds.

His forecast for the year?

"We expect a 15% premium growth for the financial period ending December, 2001, which is feasible given the company's proven track record of maintaining business growth in a highly competitive environment," Tee said.

Like major general insurers in the country, Lonpac is bracing itself for a very challenging year fraught with synergies (following mergers and acquisitions), new technical and customer-oriented inputs.

Fortunately for Lonpac, it has had the advantage of riding out turbulent storms after which it still manages to show a remarkable resilience, a quality that is expected to see it through precarious market conditions.

Source: The Star, 6 February 2001

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