KUALA LUMPUR: LPI Capital Bhd's net profit for the first quarter ended March 31, 2022, fell 25.25% to RM61.53mil from the same quarter a year ago owing to a higher claims ratio and a lacklustre performance in the investment portfolio.

       The insurer reported that revenue came in at RM397.7mil, 9.8% lower as compared to RM440.8mil in the corresponding quarter in the previous year due mainly to lower gross earned premium.

       Net return on equity was 2.9% while earnings per share dropped 25.3% to 15.44 sen.

       For the quarter, the group's wholly owned subsidiary Lonpac Insurance Bhd registered a 13.4% drop in pre-tax profit to RM61.2mil.

       "The profitability of Lonpac for 1Q2022 was partly affected by the additional costs of RM6.4mil incurred for the reinstatement of reinsurance as a result of last December’s major flood event.

       "Lonpac’s 1Q2022 performance was also affected by the increase in its technical reserve," said group chairman Tan Sri Teh Hong Piow in a statement.

       In 1Q22, Lonpac's net unearned premium reserve (UPR) increased RM54.4mil as compared to an increase of RM42.9mil in 1Q21, due to the adoption of a more conservative approach in the computation formula for its mortgage-related personal accident insurance portfolio.

       The normalisation of claims ratios arising from reopening of economy and increase in business and social activities had also contributed to an increase in claims and lowered Lonpac’s Underwriting Profit.

       Underwriting profit dove 43% to RM52.6mil with the increases in claims incurred ratio, management expense ratio and commission ratio.

       Lonpac's net earned premium income fell 14% to RM217.2mil despite its gross premium income rising 1.3% to RM476.6mil, due to the higher UPR and reinsurance outwards in 1Q22.

       Despite the slow start to the year, Teh says the reopening of the economy and the resumption of business activities will lead to a growing demand for insurance.

       "Though the LPI Group faced some headwinds in its performance for 1Q2022, the Group is confident that with its strengthened distribution channel and concerted efforts in executing its business plan, LPI will be able to report satisfactory performance for the remainder of FY2022," he said.