Chairman's Statement



Year :


To our valued shareholders, 

The financial year under review was marked by a number of unexpected events, which have heightened the sense of uncertainty that we have experienced over the past eight years to a greater or lesser degree. While many of these international events have little to do with Malaysia directly, their impact on sentiment has certainly been felt within our shores.

For instance, the Ringgit plummeted to lows that we had not seen since the Asian Financial Crisis of the late 1990s. Meanwhile, the brinksmanship between major oil-producing nations had scuttled the price of crude oil, which is an important source of income for us. And finally, the unexpected decision by the United Kingdom to quit Europe has served only to underscore the atmosphere of uncertainty in which we live.

It therefore gives me great pleasure to report to you that LPI Capital Bhd (“LPI") and its wholly-owned subsidiary, Lonpac Insurance Bhd (“Lonpac"), have performed admirably well despite the myriad challenges in the financial year under review. The Group’s profit before tax (“PBT") of RM518.9 million, up 32% year-on-year, is a remarkable achievement given the volatile backdrop. That we achieved this result despite the increase in competition and the commencement of Bank Negara Malaysia’s (“BNM") phased liberalisation plan is an endorsement of the Group’s business strategy.

Some of the key figures that are especially noteworthy include Lonpac’s healthy 17.9% increase in underwriting profit from the previous year, and the reduction of its claims incurred ratio to 38.3% from 41.0%. Its combined ratio also improved to 63.7% from 66.6% due partly to greater efficiencies driven by leveraging on technology and greater staff productivity, and also our commitment to underwriting discipline.

I am pleased to annouce that the Board of LPI has declared a second interim single tier dividend of 55 sen for the financial year ended 31 December 2016, bringing our total dividend payout to 80 sen per share.


Great Volatility Ahead 

However, we cannot afford to rest on our laurels. While we have shown commendable improvement in our 2016 performance, the results, on a quarter-to-quarter basis, have been volatile.

There is also clear evidence from other sources that economic activity has slowed in Malaysia due in part to uncertain investor sentiment and also in part to the greater prudence being practised by local industries. Further fuelling nervous sentiment in the country is the weakness of the Ringgit, which traded at multi-year lows towards the end of 2016.

The Malaysian Institute of Economic Research (“MIER") expects the full year growth of 2016 to come in at 4.2%, which is on the low side of the range predicted by authorities a year ago. However, the Institute remains confident in Malaysia’s prospects, and expects gross domestic product (“GDP") to expand between 4.5% and 5.5% in 2017. However, MIER warned that a prolonged slowdown in the external environment may further weaken global demand, representing a downside risk for Malaysia.

Our Strategies Going Forward

LPI Group’s management approach has always prioritised prudence and organic growth in developing our business, and we see no reason to move away from that strategy which has stood us in good stead. Nevertheless, we are aware that the general insurance landscape will continue to change as the next phase of the liberalisation plan takes effect.

The Group has weathered the immediate impact of liberalisation well, and has protected its market share from the competitors. We are also looking at ways to make the most of the opportunities presented by liberalisation to develop products that are relevant and useful to our customers, and also to create value for our insurance operations.

Management does expect to see some compression in margins moving forward, especially after the commencement of the next phase of the liberalisation plan on 1 July 2017. To offset this, Lonpac’s product development team is developing new specialty products and leveraging on its new Business Process Management (“BPM") system to optimise efficiency.

In addition, we have seen positive results from our Health and Personal Accident class of business following the establishment of a specialised unit to oversee the portfolio. We believe that this is another area where we can compete efficiently against our competitors and will continue to grow this segment on its own and synergistically with other classes of business.

Finally, we have created a new department in our head office to monitor and manage the performance of our 21 branches in Malaysia. The implementation of the Branches Strategic Performance Department is a part of our overall effort to optimise the use of our existing assets and distribution channels to ensure peak efficiency.


Towards Greater Sustainability

The current atmosphere of uncertainty and volatility further underscores the need for corporates, including LPI Group, to think more holistically about the sustainability of their business. While there is always a degree of risk involved in all enterprise, the greater interconnectivity of markets and between the dimensions of economics, the environment and society, has made us more susceptible to systemic risk.

For this reason, I welcome the decision of our stock exchange regulator Bursa Malaysia Securities Berhad (“Bursa Securities") to introduce new disclosure standards encouraging Malaysian corporates to think differently about their sustainability practice. The new guidelines also require Malaysian corporates to manage their sustainability impacts, and to ensure that they accurately identify their material issues and stakeholders.

In response to Bursa Securities’ call to action, we have published our inaugural sustainability report in line with Bursa Securities’ guidelines. The report, put together by the newly established Sustainability Committee, provides insight into our sustainability commitments and the initiatives implemented to mitigate our impact.

We believe that the new processes and thinking that have gone towards assembling the report have helped us become more aware of sustainability issues and of our respective roles and responsibilities in managing our impact. We expect to further refine our sustainability disclosures in future reports, and I would take this opportunity to urge all Malaysian corporates to follow the example set by Bursa Securities. 



I would like to thank the Management and staff of LPI Group for their sacrifice and hard work in achieving this highly commendable set of results, especially against the backdrop of challenges that marked 2016. We are aware that 2017 is likely to be just as challenging, if not more so, and I hope that we will all continue to put in the effort to perform just as well.

My appreciation goes to our shareholders and customers, who have supported us through good times and bad. My hope is that we have justified your trust in us through our financial performance and through our level of service. We hope to continue enjoying your support and faith in us in the years to come.

A special note of thanks goes out to our regulators, BNM and other relevant regulatory authorities for the support and advice received throughout the year. We look forward to future opportunities to collaborate together in further improving our industry.

And finally, I would like to express my gratitude to my fellow Board members for their advice and their stewardship of the Company. LPI Group would not have performed as remarkably as it did without your oversight, and I look forward to another productive year together with you on the Board.



Tan Sri Dato’ Sri Dr. Teh Hong Piow

Non-Independent Non-Executive Chairman