CORPORATE NEWS

LONPAC EXPECTS GREAT BENEFITS WITH RECENT TIE-UP

LONPAC Insurance Bhd (LPI), a highly profitable player in the local insurance market, is expected to benefit greatly from its recent tie-up with Japanese insurer Nipponkoa Insurance Co Ltd, especially in technology transfer.

The collaboration with the Tokyo-based company is also expected to provide a vital and timely avenue for Lonpac to enter into new business deals with Japanese multinationals operating in the country.

Lonpac chief executive officer Tee Choon Yeow said in an interview that in the light of tougher times ahead for the local insurance market, the company had embarked in a number of actions to generate new sources of corporate business to improve volume and profits.

"The deal with Nipponkoa was one such action. Nippokoa has decades of experience as well as the right exposure in the highly profitable fire portfolio, and we believe we can benefit greatly from its local as well as international exposure," he said.

Tee said Lonpac had already begun identifying some key Japanese multinational corps (MNCs), whose close links and business ties with Nipponkoa could be used to further improve the company's fire portfolio.

"We hope to move to the next phase, which is working together with our Japanese partner to eventually penetrate the insurance market. It will take time but this is the first step for us," he said.

Last week, Lonpac's parent body - LPI capital Bhd - in an announcement to the Kuala Lumpur stock exchange, said it planned to sell 10.7million shares, or 10% of its current capital, to the Japanese insurer at a price to determined later, subject to the approval of the relevant authorities.

Nipponkoa is Japan's fourth largest casualty insurance company by assets, a result of merger between Nippon Fire Marine Insurance Co and Koa Fire Marine Insurance Co in July 2000.

Tee said another important business consequence of the tie-up with Nipponkoa was the review of gross premium growth at Lonpac.

"We are hoping to see significant growth in our gross premium rates in the next one or two years with the participation of the Japanese partner in spite of the increasingly difficult local and international conditions, which are having a negative impact on the insurance business," he said.

On Lonpac's business performance for financial year 2001, Tee said total gross premium stood at RM202mil, registering a 6.2% growth over the RM190.2mil a year ago.

Net premium for 2001 stood at RM117mil, a marginal improvement compared with the previous year's RM116mil. Profit before tax rose to RM31.9mil, from RM30.9mil before.

Commenting on the position of the company's balance sheet, Tee said shareholders' funds had registered an impressive growth of 13.6%.

"As at December last year, investment in quoted securities like shares showed an unrealised gain of RM88.5mil over its book value, which adds 20% to shareholder value, reflecting the effectiveness of the group's investment policy," he added.

Source: The Star, 8 February 2002

Speech by YB Dato' Chan Kong Choy, Deputy Finance Minister

Speech by Mr Ken Matsuzawa, President & CEO of Nipponkoa Insurance Co. Ltd.

The proposed subscription by Nipponkoa involves the issuance of 10,739,000 ordinary shares of RM1.00 each in the Company representing up to 10% of the existing issued and paid-up share capital of LPI, at a price to be determined later based on the five days weighted average market price of the LPI shares prior to the price fixing date, which in any event shall not be lower than the par value of the LPI shares.

The subscription shares shall rank pari passu in all respects with the existing ordinary shares of LPI. The subscription shares will not be entitled to the dividends to be declared in respect of the financial year ended 31 December 2001.

Nipponkoa, a company incorporated in Japan, is a comprehensive insurance group, established in Japan and listed on the Tokyo, Osaka and Nagoya Stock Exchanges. Nipponkoa provides comprehensive insurance services worldwide and has been operating in Malaysia as a major partner with Malaysia & Nippon Insurans Berhad for the last 25 years.

The subsidiaries of LPI are mainly involved in the underwriting of general insurance, investment holding and the financing of leases. The proposed subscription would enabled Lonpac Insurance Bhd, a wholly own subsidiary of LPI to diversify its existing insurance business by tapping into the business of Nipponkoa, locally and internationally. This would further enhance the future earnings of the LPI Group. In addition to that, it will also enable the Company to raise additional funds for working capital purposes, without overly imposing on the shareholders of LPI.

The Proposed Subscription is conditional upon approvals being obtained from the following:-