one heart Passion is nurtured company wide because it is through LPI Capital Bhd Annual Report 2009

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1 one heart Passion is nurtured company wide because it is through 18 LPI Capital Bhd Annual Report 2009

2 LPI Capital Bhd Annual Report

3 CORPORATE MILESTONES On 24 May 1962, London and Pacific Insurance Company Limited ( LPICL ) was incorporated as a private limited company On 9 April 1963, LPICL was registered as an approved insurer under the Malaysian Insurance Act, LPICL paid its 1st dividend of 25% tax exempt per ordinary share of RM1.00 each LPICL changed its name to London and Pacific Insurance Company Sdn Bhd ( LPICSB ) with effect from 15 April LPICSB established its first 2 branches in Ipoh (Perak) and Seremban (Negeri Sembilan) on 2 January On 2 January 1972, LPICSB established another 3 branches in Johor Bahru (Johor), Melaka and Penang. The share capital increased to RM6,000,000 ordinary shares of RM1.00 each from an initial paidup capital of RM1,000,000 in 1963, through 1:2 bonus issue and share allotment. LPICSB was converted into a public company and changed its name to London and Pacific Insurance Company Berhad ( LPICB ) on 30 December On 2 January 1973, LPICB established another 2 branches in Kuantan (Pahang) and Kota Kinabalu (Sabah). The share capital increased to RM8,000,000 ordinary shares of RM1.00 each through 1:3 rights issue at RM Establishment of 8th branch in Singapore on 2 January The share capital of LPICB increased to RM11,000,000 ordinary shares of RM1.00 each through allotment of 7½% Convertible Preference Shares of RM0.50 each. 20 LPI Capital Bhd Annual Report 2009

4 1986 Establishment of 9th branch in Kuching (Sarawak) on 1 September Establishment of 10th branch in Kota Bharu (Kelantan) on 1 March Establishment of 11th branch in Alor Setar (Kedah) on 1 June The share capital increased to RM19,800,000 ordinary shares of RM1.00 each through 4:5 bonus issue On 8 January 1993, LPICB was listed on the Second Board of Bursa Malaysia Securities Berhad ( Bursa Securities ), then known as the Kuala Lumpur Stock Exchange Lonpac Insurance Bhd ( Lonpac ), a wholly-owned subsidiary of LPICB, was incorporated on 12 July The share capital increased to RM29,700,000 ordinary shares of RM1.00 each through 1:2 bonus issue Establishment of 12th branch in Miri (Sarawak) on 1 February On 15 April 1996, LPICB moved its Head Office to Bangunan Public Bank, No. 6, Jalan Sultan Sulaiman, Kuala Lumpur. The first office since incorporation was in Dataran Kewangan Darul Takaful, No. 4, Jalan Sultan Sulaiman, Kuala Lumpur, then known as UMBC Building. On 15 August 1996, LPICB was appointed by the Ministry of Human Resources to administer an insurance scheme; Foreign Workers Compensation Scheme to provide coverage for industrial accident to foreign workers as provided under Section 26(2) of the Workmen s Compensation Act Introduction of the 1st Employees Share Option Scheme ( ESOS ) for staff of LPICB. Implementation of Staff Housing Loan Scheme of LPICB. LPICB crossed the RM30 million mark for the first time with a record pre-tax profit of RM32.6 million. The share capital increased to RM53,460,000 ordinary shares of RM1.00 each through 2:5 bonus issue and 2:5 rights issue at RM7.00. LPI Capital Bhd Annual Report

5 CORPORATE MILESTONES (cont d) 1997 The listing of LPICB shares was transferred to the Main Board of Bursa Securities on 17 January Establishment of 13th branch in Tawau (Sabah) on 1 February On 15 May 1997, LPICB signed a reinsurance agreement with panel of reinsurers on Foreign Workers Compensation Scheme, witnessed by Dato Lim Ah Lek, Minister of Human Resources. The new Corporate Logo was launched on 22 May 1997 in conjunction with LPICB s 35th Anniversary Malaysian Rating Corporation Berhad ( MARC ) rated the general insurance financial strength rating of Lonpac at AA The share capital increased to RM106,920,000 ordinary shares of RM1.00 each through 1:1 bonus issue. Exercised a rationalisation scheme on 1 May 1999 to transfer the entire insurance business from LPICB to Lonpac. LPICB changed its name to LPI Capital Bhd ( LPI ) on 3 May Launched Lonpac s corporate website on 30 October The share capital increased to RM107,355,000 ordinary shares of RM1.00 each through ESOS exercise The share capital increased to RM107,398,000 ordinary shares of RM1.00 each through ESOS exercise. Official launching of Lonpac E-Assist, a complimentary emergency car assistance programme by Dato Chan Kong Choy, Deputy Minister of Finance on 30 October Launched Motor E-Insurance System for Public Finance on 26 November The system linked to Jabatan Pengangkutan Jalan ( JPJ ) s system to facilitate the renewal of road tax On 7 February 2002, Lonpac celebrated New Business Partnership with NIPPONKOA Insurance Co. Ltd ( NIPPONKOA ), witnessed by Dato Chan Kong Choy, Deputy Minister of Finance. The share capital increased to RM118,137,000 ordinary shares of RM1.00 each through subscription of new ordinary shares by NIPPONKOA. Introduction of the 2nd ESOS for staff of LPI. Set up a Disaster Recovery Centre ( DRC ) in Seremban. 22 LPI Capital Bhd Annual Report 2009

6 2003 Lonpac established a Complaints Unit in August Launched Motor E-Insurance System for agents. The system provides the agents with immediate access to up-to-date information on the policyholders. The share capital increased to RM120,159,000 ordinary shares of RM1.00 each through ESOS exercise. In October 2003, MARC upgraded Lonpac s financial strength rating from AA- to AA as a result of its strong financial standing and security profile in the insurance industry Official opening of Customer Service Centre on 29 July Official launching of Lonpac Home-Assist, a complimentary referral services on house related difficulties. The share capital increased to RM128,901,000 ordinary shares of RM1.00 each through ESOS exercise Launching and signing ceremony of Hyundai 24 Hours Assistance between Lonpac and Kah Bintang Auto Sdn Bhd on 25 March NIPPONKOA s Board meeting and official visit to Lonpac on 26 July LPI emerged as one of the 7 winners of Malaysian Business Corporate Governance Merit Award 2004 on 11 August On 11 August 2005, LPI emerged as one of the Top 3 Winners in the Financial Services category of the KPMG Shareholder Value Award LPI emerged as one of the winners of the Best Under A Billion Award for Asia Pacific Region by Forbes Asia on 10 November Both LPI and Lonpac were listed in the Malaysia 1000 for year 2004/ 2005, a directory of Top 1000 Malaysian companies, jointly published by the Companies Commission of Malaysia, Ministry of Domestic Trade and Consumer Affairs and Basis Publications House Sdn Bhd, an associate company of BERNAMA. The share capital increased to RM138,723,000 ordinary shares of RM1.00 each through ESOS exercise. LPI Group crossed the RM100 million mark for the first time with a record pre-tax profit of RM103.6 million LPI was accorded with the Malaysian Business Corporate Governance Merit Award 2005 on 23 May Official visit by President of NIPPONKOA, Mr. Ken Matsuzawa on 27 July LPI Capital Bhd Annual Report

7 CORPORATE MILESTONES (cont d) LPI won the KPMG Shareholder Value Award 2005, Sectoral Winner under Financial Services category on 5 October On 30 November 2006, LPI was accorded with the Certificate of Merit in recognition of the Company s annual report having qualified for the final of NACRA On 7 December 2006, LPI was awarded a Certificate of Finalist in recognition as Finalist of the NAfMA On 5 January 2007, Lonpac has been selected by the Group Procurement Division of IGB Corporation Berhad ( IGB ) as one of IGB s Top Ten Valued Supplier for 2006 in recognition of Lonpac s performance which met IGB s expected level of satisfaction, demonstration of professionalism at work as well as rendering fullest support with continuous valueadded services. On 15 February 2007, Lonpac participated in the Road Safety Campaign in conjunction with the Chinese New Year Festival LPI was accorded with the Malaysian Business Corporate Governance Merit Award 2006 on 12 July LPI held 45% interest in an insurance company, named CampuBank Lonpac Insurance Plc, in Cambodia for the purpose of carrying out general insurance business in that country, pursuant to approvals received from Bank Negara Malaysia and the relevant regulatory authorities in Cambodia. LPI won the KPMG Shareholder Value Award 2006, Sectoral Winner under Financial Services category on 1 October On 1 November 2007, Lonpac was assigned a financial strength rating of A (Excellent) and an issuer credit rating of a by A.M. Best. On 13 December 2007, LPI was awarded a Certificate of Merit of the NAfMA 2007 in recognition of its commendable management accounting practices On 5 February 2008, Lonpac was selected as one of IGB s Top Ten Valued Supplier for Lonpac was awarded the Chubb Multinational Risk Group Outstanding Affiliate Service Award 2007 in recognition of Lonpac s efficient service and continued support of Chubb s Multinational Risk Group. LPI won under the Best Return to Shareholder category and also accorded with the Malaysian Business CIMA Enterprise Governance Merit Awards 2008 on 21 July LPI won the KPMG Shareholder Value Award 2007, Winner under Financial Services category on 15 August LPI Capital Bhd Annual Report 2009

8 Established its 14th branch in Sandakan (Sabah) and 15th branch in Batu Pahat (Johor) on 15 September On 30 September 2008, A.M. Best reaffirmed Lonpac s financial strength and issuer credit rating at A (Excellent) and a respectively. Official launching of Southern Region office and Melaka new office on 10 December Lonpac won the Chubb Multinational Risk Group Outstanding Affiliate Service Award 2008 on 31 March 2009 in recognition of Lonpac s efficient service and continued support of Chubb s Multinational Risk Group. Established its 16th branch in Klang (Selangor) on 15 April Lonpac bagged all the five (5) categories of the Euromoney 2009 awards on 26 May 2009 to claim the overall winner Best Insurer in Malaysia award. The categories are: - Best Insurer for Innovation, Malaysia - Best Insurer for Price, Malaysia - Best Product Range, Malaysia - Best Insurer for Claims Resolution, Malaysia - Best Consultant for Insurance Risk Transfer, Malaysia Established its 17th branch in Sibu (Sarawak) on 15 June LPI emerged a Sectoral Winner under Financial Services category of the KPMG Shareholder Value Award 2008 on 21 August LPI was also conferred with Winner- Financial Services of the same award. On 14 September 2009, A.M. Best reaffirmed Lonpac s financial strength rating of A- (Excellent) and issuer credit rating (ICR) of a-. LPI was accorded with the Merit Award of the Malaysian Business CIMA Enterprise Governance Awards 2009 on 6 November Launched Customer Relationship Management System on 10 November This system provides a centralised database on customer s needs and transaction profile from first purchase through post sale. On 1 December 2009, LPI was accorded with the Certificate of Merit in recognition of the Company s annual report having qualified for the final of NACRA On 10 December 2009, LPI was conferred with Most Timely Held Annual General Meeting Award and Distinction Award of the Malaysian Corporate Governance Index 2009 by the Minority Shareholder Watchdog Group. LPI Capital Bhd Annual Report

9 CUSTOMER CARE RISE TO THE TOP In today s hypercompetitive global economy where customers have more choices than ever before, every company marvels at how to strive for differentiation that gives a far greater competitive edge over its competitors. Is there really a secret formula on how to keep our customers for life and what it takes to rise to the top of the list? A MAGIC PILL TO SUCCESS At Customer Service, we believe that the magic pill to success, apart from our products and services offered, is through exceptional customer service that makes our customers become our raving fan and tell the world about us. In line with this belief, Customer Service has actively strives, invests time and resources to build trusted, longlasting and valuable relationships with our customers to keep them coming back for more, that will in return provide a secure and rising revenue stream to Lonpac. One of many ways to master the art of customer retention is through customer s complaints and feedback. As they always say, complaint is bad for business and jeopardises future sales, but in reality it is also possible to turn customer complaints into profits and win a loyal customer. It is with the above in mind, apart from Complaints Unit as a platform to measure customer s satisfaction and provide fast response to the complaint, Customer Service has also created its online presence on Lonpac s website (customerservice@lonpac.com) to address customers complaints, feedback and enquiries on daily basis. With the intention of creating collaboration with other departments effectively, Customer Service has also begun its 2nd phase of the CRM (Customer Relationship Management) System project that covers all classes of insurance. The system helps to manage customer database, request or complaints where information can be entered, stored and accessed by employees in different departments. 26 LPI Capital Bhd Annual Report 2009

10 In the quest to keep growing in strength and even flourishing during these tougher economic times, its Direct Marketing Unit has also never sit back and relax, as they have been constantly working on its tele-marketing and bancassurance projects with Public Bank Berhad ( PBB ) from year to year, with its number of engaged customers touching It has often been said that a good product and high technology do not automatically guarantee success. Excellence in Customer Service, certainly, needs to be supported by an equally good business strategies and staff. To start in the right footing, staff have been taught to have passion and genuine dedication to customer service work, as we strongly believe a dedicated staff will be passionate about providing unparalleled service to customers and win over them fully. After all, building longlasting relationships is what customer service is all about. E-ASSIST: A LONG-TERM BACKBONE We bring you a note from one of our valued customers, Not only my car but two houses also insured under Lonpac, because I trust Lonpac. As the intellectual always says, today s satisfied customer of ours could be tomorrow s competitor s satisfied customer. Recognising the importance of keeping a satisfied customer as the key to survival, Lonpac E-Assist has focused a great deal of attention since the past 8 years on ensuring that its members get the best possible assistance during car emergency. In response to provide exceptional customer care to our customers, Lonpac E-Assist has been initiated to provide a complimentary emergency car assistance programme for Lonpac s Comprehensive Private Car Insurance policyholders that is made available nationwide for free up to 300km (round-trip). It offers a wide scope of protection ranging from 24-Hour Minor Roadside Repairs and Emergency Towing Services, Car Rental Referral Services and Arrangement for Hotel Accommodation in the event of car breakdown or accident. Since its launching 8 years ago in 2001, demand for the service has steadily increased, driven by increased in motor insurance production, which reflects the success of the service in the eye of customers and eventually the name of Lonpac for that matter has become their word, and word has power indeed. This year itself, 95% of the members who have acquired for the services have recorded their appreciation and thanks to Lonpac and our service provider for the assistance rendered during breakdown or accident. What is more delightful to us other than to see as time goes by is that Lonpac E-Assist has grown together with our customers and gained a significant acceptance and recognition of its presence in the insurance industry. Eventhough the programme might not be enjoyed by all members all the time, but the fact that we are reaching out to let them know we are there for them 24 hours during emergency goes a long way. LPI Capital Bhd Annual Report

11 CUSTOMER CARE (cont d) LONPAC HOME-ASSIST: A CONNECTION TO A HASSLE-FREE Along with the need for our customer to take an adequate insurance coverage for their properties, the need to measure and maintain their properties in good condition is equally important. Responding to the needs of our Houseowner and Householder customers, Lonpac Home-Assist was officially launched on 29 July 2004 aims to eliminate the hardship of the policyholders in the event of home inconveniences emergency. Eventhough the programme is purely on referral basis but we believe in this simple gesture of going the extra mile in providing services will have a major impact in sustaining our customers over the long haul. This complimentary referral assistance programme consists of electrical assistance, plumbing assistance, air-conditioning services, locksmith assistance, pest control services, leaking roof, cleaning and restoration of carpets. EXCITE LEAFLET AN EMOTIONAL BOND WITH E-ASSIST MEMBERS While we continue to place significant importance in building customer care excellence and enhancing branding, we are also constantly solidifying our presence in developing right communication tool. With the belief that communication is crucial for our presence, Excite Leaflet has been published annually for its comprehensive private car insurance policyholders aiming to enhance our Company s reputation and improve insurer-customer communications. In a bid to nurture Excite Leaflet to speak to our customer in an effective way, it is designed with few sections featuring articles that give information on products and services, Feedback Column that serves as a platform for gathering and sharing feedback and experiences, Golf Carnival Tribute for our golfers to participate and stand a chance of winning attractive prizes in the golf tournament and some of the Privilege Vouchers as a token of appreciation in support to Lonpac. In a nutshell, it is about creating and sustaining an emotional connection with the customers that leaves them feeling they are the most important person in that moment in time, no matter what. 28 LPI Capital Bhd Annual Report 2009

12 KEEP OUR CUSTOMERS IN THE LOOP Where competition is keen, the competitive advantage would lie in the company s ability to positively create its presence in the virtual market where customers know who they are and what they provide with a single click. Realising the fact, more and more customers are getting acquainted with looking for information and advice online, Customer Service and all other departments have been closely and constantly working together in updating its website to embrace the need to stay ahead of the trend. With the aim to make easy for our customers to channel us their enquiries, feedback or voice concerns, a link from Customer Service, Complaints Unit to Claims department have been created and closely supervised and attended by respective staff of each department. With that in place, every customer s voice can now be heard. By creating these compelling online experiences to reach a wider range of customers, Lonpac can build greater customer loyalty. STAND HIGH ON THE LEARNING CURVE 2009 was a challenging year with competition stiffer than ever. Despite of all the tough challenges and daunting tasks which include an increase in number of calls averaging 8,000 per month plus 15,000 walk-in customers per year, we managed to fair well in satisfying the customers needs. LPI Capital Bhd Annual Report

13 LPI CAPITAL IN THE NEWS 30 LPI Capital Bhd Annual Report 2009

14 LPI Capital Bhd Annual Report

15 TEN-YEAR GROUP FINANCIAL SUMMARY OPERATING RESULTS (RM 000) Revenue Gross Premium Underwriting Surplus Profit Before Taxation Profit After Taxation KEY BALANCE SHEET DATA (RM 000) Total Assets Total Liabilities Share Capital Shareholders Equity SHARE INFORMATION Per share (sen) Basic Earnings Diluted Earnings Net Dividend Per share (RM) Net Tangible Assets Share Price as at 31 December (RM) Market Capitalisation (RM 000) FINANCIAL RATIOS (%) Profitability Ratios Return on Equity ( ROE ) Return on Assets Underwriting Margin Operating Margin Net Claims Incurred Productivity Ratios No. of Employees Gross Premium Income per Employee (RM'000) No. of Policies Issued per Employee No. of Claims Settled per Claims Staff Valuation on Share Net Dividend Yield Dividend Payout Ratio Price to Earnings Multiple (times) Price to Book Multiple (times) N1 - Restated ROE after taking into account of FRS 139 adoption N2 - Based on previous year s average market price N3 - Based on current year s closing market price 32 LPI Capital Bhd Annual Report 2009

16 YEAR ENDED 31 DECEMBER , , , , , , , , , , , , , , , , , , , ,238 97,644 75,002 59,231 59,111 44,317 28,121 21,212 16,793 19,082 20, , , , , ,560 77,498 43,569 36,292 31,063 30, , ,247 87,770 78,128 74,703 55,501 35,297 28,443 26,843 25,017 1,488, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,900,505 1,310,932 1,678,548 1,297,060 1,151, , , , , , N ,244 1,154 1, ,912 1,836 1,473 1,454 1,363 1,268 1,123 1, ,036 1,008 1, ,031 1, , N2 5.8 N N2 9.5 N2 6.1 N3 7.3 N3 4.4 N3 3.9 N3 5.0 N3 5.9 N LPI Capital Bhd Annual Report

17 TEN YEAR GROUP FINANCIAL SUMMARY 2009 PRODUCTION AND PROFITABILITY GROSS PREMIUM (RM 000) , , , , , , , , , ,246 PROFIT BEFORE TAXATION (RM 000) , , , , , , , , , ,335 UNDERWRITING SURPLUS (RM 000) , , , , , , , , , , LPI Capital Bhd Annual Report 2009

18 STRONG BALANCE SHEET GROWTH TOTAL ASSETS (RM 000) , , , , , , , , , ,488,697 SHAREHOLDERS EQUITY (RM 000) , , , , , , , , , ,673 ENHANCING SHAREHOLDER VALUE EARNINGS PER SHARE (SEN) RETURN ON EQUITY (%) * TOTAL NET DIVIDENDS (SEN) Special Final Interim Dividend payout ratio * Restated Return on Equity after taking into account of FRS 139 adoption LPI Capital Bhd Annual Report

19 MARKET CAPITALISATION AND SHARE PRICES Market Capitalisation and Share Prices as at 31 December Share Price (RM) Market Capitalisation (RM) ,458, ,516, ,151,400, ,297,060, ,678,548, ,310,932, ,900,505, LPI Capital Bhd Annual Report 2009

20 LPI SHARE PERFORMANCE IN 2009 Monthly Highest Lowest Share Price (RM) 4 2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 MONTHLY HIGHEST AND LOWEST SHARE PRICE Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec HIGHEST LOWEST LPI Capital Bhd Annual Report

21 SEGMENTAL ANALYSIS for the year ENDED 31 DECEMBER 2009 REVENUE 10.3% 5.4% * 89.7% 94.6% by Geographical Location by Business Segments PROFIT BEFORE TAX 2.6% 21.3% ** 97.4% by Geographical Location 78.7% by Business Segments ASSETS EMPLOYED 5.9% 51.5% * 94.1% 48.5% by Geographical Location by Business Segments * Less than 0.1% ** Less than - 0.1% Malaysia Singapore Investment Holding Financing of Leases General Insurance 38 LPI Capital Bhd Annual Report 2009

22 GROSS PREMIUM BY CLASS 33.7% 31.6% 34% 33.2% % % 28.8% 31.5% UNDERWRITING SURPLUS BEFORE MANAGEMENT EXPENSES BY CLASS 26.8% 53.7% % 48.2% % 3.5% 11.1% 21.3% Miscellaneous Marine, Aviation & Transit Motor Fire LPI Capital Bhd Annual Report

23 GROUP QUARTERLY PERFORMANCE 2009 RM 000 First Quarter Second Quarter Third Quarter Fourth Quarter Year 2009 FINANCIAL PERFORMANCE Revenue 210, , , , ,299 Operating profit 41,895 29,697 42,283 46, ,407 Profit before tax 42,237 29,994 42,584 46, ,335 Profit attributable to equityholders of the parent 35,478 22,742 32,897 34, ,088 Earnings per share (sen)* Net dividends per share (sen) RM 000 First Quarter Second Quarter Third Quarter Fourth Quarter Year 2008 FINANCIAL PERFORMANCE Revenue 185, , , , ,728 Operating profit 37,380 24,236 35,145 44, ,967 Profit before tax 37,360 24,308 35,379 44, ,564 Profit attributable to equityholders of the parent 27,415 17,906 26,236 32, ,247 Earnings per share (sen)* Net dividends per share (sen) * Quarterly earnings per share is based on the weighted average number of ordinary shares in issue during the quarter whereas the year-to-date earnings per share is based on the weighted average number of ordinary shares in issue during the year. 40 LPI Capital Bhd Annual Report 2009

24 Statement of Value Added Value added is a measure of wealth created by the Group through various business activities. The statement of value added shows the total wealth created and how it was distributed to stakeholders, including the Government, as well as reinvestment for the replacement of assets and further expansion of the business of the Group. Value Added 2009 RM RM 000 Transfer from general insurance revenue account excluding staff costs and depreciation 173, ,519 Investment income 39,700 34,726 Management expenses (5,502) (2,193) Share of results of associated company Value added available for distribution 208, ,649 Distribution of Value Added 2009 RM RM 000 To employees : Staff costs 44,380 36,886 To the Government : Tax expense 35,247 37,317 To providers of capital : Dividend paid to shareholders 92,926 87,352 To reinvest in the Group : Depreciation Retained profits 3,032 33,162 3,199 16,895 Total distributed 208, ,649 45% 17% 21% % % 20% 17% 11% Providers of capital Government Employees Reinvestment in the Group LPI Capital Bhd Annual Report