LPI CAPITAL BHD (4688-D) (Incorporated in Malaysia) Minutes of the Fifty-Fifth Annual General Meeting of the shareholders held at Sabah Room, Basement II, Shangri-La Hotel Kuala Lumpur, 11 Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia on Monday, 21 March 2016 at 11.00 a.m. PRESENT : Tan Sri Dato' Sri Dr. Teh Hong Piow (Non-Independent Non-Executive Chairman) Mr Tee Choon Yeow (Independent Non-Executive Co-Chairman) Mr Lee Chin Guan (Independent Non-Executive Director) Mr Tan Kok Guan (Executive Director/ Chief Executive Officer) Mr Quah Poh Keat (Independent Non-Executive Director) Ms Chan Kwai Hoe (Independent Non-Executive Director) CHAIRMAN OF THE MEETING : Mr Tee Choon Yeow IN ATTENDANCE : Ms Kong Thian Mee (Company Secretary) BY INVITATION : Mr Loh Kam Hian (External Auditors, Messrs KPMG)
WELCOME ADDRESS On behalf of the Board, Tan Sri Dato' Sri Dr. Teh Hong Piow, the Chairman welcomed all the attendees to the Meeting. QUORUM There being quorum, the Meeting was called to order at 11.00 a.m. NOTICE OF MEETING The notice convening the Meeting, having been circulated earlier to all the members of the Company within the statutory period, was taken as read. ORDINARY BUSINESS AUDITED FINANCIAL STATEMENTS AND REPORTS The Audited Financial Statements of the Company and the Group for the financial year ended 31 st December 2015 and the Reports of the Directors and Auditors having been circulated to all the members of the Company within the statutory period, were laid before the Meeting for discussion. Financial Performance Mr Tan Kok Guan presented the following LPI Group s performance in 2015 to the shareholders :- For the financial year ended 31 st December 2015, the Group s pre-tax profit registered a strong growth of 15 % to RM393.1 million from RM341.9 million registered in the previous corresponding period while net profit attributable to shareholders increased by 13.4% from RM283 million to RM321 million. Total operating revenue of the Group grew by 9.8% from RM1.17 billion to RM1.28 billion. Consequently, the Group s earnings per share improved significantly by 13.2% to 96.69 sen from 85.45 sen recorded in financial year ended 31 st December 2014. Net return on equity rose to 18.5% from 17.1%, an increase of 8.2%. The impressive performance of the Group in 2015 was attributed partly to the realisation of gains of the Group s investment in equities but mainly contributed by the strong results of the Group s wholly owned subsidiary, Lonpac Insurance Bhd (Lonpac).
Despite operating in a volatile economy environment and a highly competitive market place, Lonpac has delivered a credible performance by posting a new high pre-tax profit of RM286.7 million for the financial year ended 31 st December 2015, an improvement of 12.3% from RM255.3 million achieved in financial year ended 31 st December 2014. The depressed economic scenario in 2015 has adversely affected the Malaysian general insurance industry, as reflected in the slower growth of gross premium income of 2.3% for 2015 as compared to 5.9% recorded in 2014. In comparison, Lonpac registered a healthy 8.8% growth in gross premium to RM1.25 billion in the financial year 2015 which was more than the 3.9% growth rate registered in financial year 2014. This strong business growth trend has enabled Lonpac to increase its market share from 6.2% as at 31 st December 2014 to 6.6% as at 31 st December 2015. Lonpac s disciplined risk selection and sound claims management have translated into a higher underwriting profit of RM236.3 million in financial year 2015, a 15.9% increase from RM203.9 million reported in financial year 2014. The strong underwriting performance was reflected in the low combined ratio of 66.6%, as compared to the industry combined ratio of 88.4%, while the claims incurred ratio reduced to 41%, much lower than the industry average of 56.5%. In view of the impressive performance of the Group, the Board had declared a second interim single-tier dividend of 50 sen. The second interim dividend payment which amounted to RM166 million was paid on 24 th February 2016 and is part of the Group s effort to reward its shareholders. Together with the first interim single-tier dividend of 20 sen amounting to RM66.4 million which was paid in August 2015, the total dividend payout for the financial year 2015 of RM232.4 million is 40.2% higher than the total dividend payout of RM165.8 million in the financial year of 2014. The insurance industry is likely to face more challenges in the near future, with impending liberalisation and greater pressures being exerted on the operating conditions and profitability of the Group. However, the Management remains confident in the Group s strategies and emphasis on sustainability and organic growth. The Management will continue to be selective on risk acceptance and maintain posture of prudence. The Board is confident that Lonpac s healthy financial position, strong capital adequacy ratio and prudent business plan are sufficient to ensure that it could compete effectively in its core business going forward.
The Representative of Minority Shareholder Watchdog Group (MSWG), Mr Lee Chee Meng informed the Meeting that MSWG had sent in a few questions to the Company for further clarification. On behalf of the Board, Mr Tan answered the questions raised by MSWG as per its letter dated 11 March 2016. The questions and answers were as following :- Question (1) The Company had identified that it would participate in the Klang Valley Mass Rapid Transit Phase 2 infrastructure project to expand its premium growth in 2016. Please explain whether the Company has the technical expertise on this class of insurance that involves high risk and will the Company be able to seek reinsurance support as this type of insurance is normally dominated by big foreign insurance companies? Answer (1) The implementation of the various infrastructure projects by the Government will boost the Engineering Insurance portfolio of the insurance industry. Lonpac, as an active Engineering Insurance underwriter, will compete to participate in the insurance programme of these mega projects. As the lead insurer for the existing MRT 1 project, Lonpac has the experience to write and manage insurance coverage for projects that involved massive civil engineering and tunneling works. Lonpac s underwriters and risk engineers work closely with global reinsurers who have the experience and technical expertise in insuring and managing complex engineering projects. Lead reinsurers will also provide claim management supports involving claim investigation and adjustment of more complicated claims. Lonpac will continue to work with reinsurers who will provide technical expertise and reinsurance capacity in its submission for participation in MRT 2 project. With experience in insuring MRT 1 project, Lonpac is confident in managing the insurance programme of another massive infrastructure project like the MRT 2. Question (2) The Group has been progressively selling down the Public Bank shares with substantial gain which constitutes the bulk of the Available-for-Sale Financial Assets.
What is the Group s strategy in equity investment moving forward and whether the Board would consider investing in other dividend paying shares for both capital and dividend income to buffer against the uncertainty in underwriting surplus? Answer (2) The Board monitors closely the performance of the Group s equity portfolio and any realisation of gains of the investment in equities will be carried out prudently. Due to the volatility of the equity market, the Board adopts a more cautious approach in equity investment but will continue to seek investments that provide satisfactory returns with prudent level of risk. As its insurance business is generally short-tail, the bulk of the Group s other investments are in money market instruments and fixed income securities in order to maintain liquidity. Question (3) The Group has tied up with a Telco company to increase the premium income. Please provide the Telco s name and the success rate in terms of expected and actual revenue, the types of insurance distributed and the cost structure of distribution in terms of commission paid and expenses? Answer (3) Lonpac has a programme providing insurance coverages to the customers of a Telco company. However, due to client confidentiality, Lonpac is unable to disclose names of its customers. The insurance programme commenced in June 2014 and Lonpac managed to write a total gross premium of RM2.3 million in 2014. In 2015, the total premium written increased to RM4.2 million. The claims ratio for the programme falls within its expectation and is able to generate a reasonable underwriting profit. Commission paid under this programme is within the industry s commission guidelines. Lonpac will continue to develop this distribution channel and hope to market other personal insurance products to the subscribers.
Question (4) What were the pre-tax profits of the Singapore branch for the last two financial years; i.e. 2014 and 2015? How would the Company increase the branch s profitability moving forward as the Singapore insurance market is highly competitive? Answer (4) In financial year 2014, Singapore branch registered a pre-tax profit of RM8.5 million while in 2015, it reported a lower pre-tax profit of RM3.3 million. The lower pre-tax profit in 2015 was because of there was no fair value gain on the branch investment property in financial year 2015 as compared to RM4.8 million gains in 2014. With the competitive market conditions in Singapore, underwriting results are expected to be more volatile. Lonpac is constantly reviewing its portfolio experience in Singapore and hope to achieve a more stable and profitable portfolio balance. Lonpac Singapore branch s present target market is to develop personal insurances and is actively building its distribution channel in this area. Lonpac is confident that Singapore branch will perform better with a more balance portfolio mix. The Meeting noted that the Audited Financial Statements were for discussion only as they do not require shareholders approval pursuant to the provision of Sections 169(1) and 169(3) of the Companies Act, 1965. Hence, this matter was not put for voting. ORDINARY RESOLUTION 1 RE-ELECTION OF DIRECTOR MR TEE CHOON YEOW The Chairman of the Meeting explained that he was subject to retirement by rotation under Article 97 of the Company s Articles of Association and that being eligible, he had offered himself for re-election. The following ordinary resolution was put to the Meeting by a shareholder for a vote and was duly THAT Mr Tee Choon Yeow, retiring in accordance with Article 97 of the Articles of Association of the Company, be and is hereby re-elected a Director of the Company.
ORDINARY RESOLUTION 2 RE-ELECTION OF DIRECTOR MS CHAN KWAI HOE The Chairman of the Meeting explained that Ms Chan Kwai Hoe was subject to retirement under Article 102 of the Company s Articles of Association and that being eligible, she had offered herself for re-election. THAT Ms Chan Kwai Hoe, retiring in accordance with Article 102 of the Articles of Association of the Company, be and is hereby re-elected a Director of the Company. ORDINARY RESOLUTION 3 RE-ELECTION OF DIRECTOR MR LEE CHIN GUAN The Chairman of the Meeting explained that Mr Lee Chin Guan was subject to retirement under Article 102 of the Company s Articles of Association and that being eligible, he had offered himself for re-election. THAT Mr Lee Chin Guan, retiring in accordance with Article 102 of the Articles of Association of the Company, be and is hereby re-elected a Director of the Company. ORDINARY RESOLUTION 4 RE-APPOINTMENT OF DIRECTOR TAN SRI DATO SRI DR. TEH HONG PIOW The Chairman of the Meeting explained that Tan Sri Dato Sri Dr. Teh Hong Piow was subject to retirement under Section 129 of the Companies Act, 1965 and that being eligible, he had agreed to offer himself for re-appointment. THAT Tan Sri Dato Sri Dr. Teh Hong Piow, retiring pursuant to Section 129 of the Companies Act, 1965, be and is hereby re-appointed a Director of the Company to hold office until the next Annual General Meeting.
ORDINARY RESOLUTION 5 PAYMENT OF DIRECTORS FEES The Chairman of the Meeting informed the Meeting that a sum of RM375,500.00 was recommended for payment as Directors Fees for the financial year ended 31 December 2015. THAT the payment of Directors Fees of RM375,500.00 for the financial year ended 31 December 2015 be hereby approved. ORDINARY RESOLUTION 6 RE-APPOINTMENT OF AUDITORS The Chairman of the Meeting informed the Meeting that Messrs. KPMG had indicated their willingness to continue in office. The Meeting was requested to consider the re-appointment of Messrs. KPMG as auditors of the Company for the next financial year. THAT Messrs. KPMG be re-appointed as Auditors of the Company for the financial year ending 31 December 2016 AND THAT the Directors be authorised to fix their remuneration. TERMINATION OF MEETING There being no other business, the Meeting terminated at 12.00 noon. with a vote of thanks to the Chair. Signed as a correct record, Kuala Lumpur Date :.... Chairman of the Meeting