2012 LPI Capital Annual Report: Letter to Stakeholders

NURTURINGGROWTH ACHIEVEMENTS AND SUCCESSES WILL HAVE

LESS SIGNIFICANCE WITHOUT SUSTAINABILITY,

PASSION AND PROGRESS.

ANNUAL REPORT 20126060

ANNA NUALUALUALUUAA REREREREPPPORPORRT 2T 20120126060060

Tan Sri Dato’ Sri Dr. Teh Hong PiowNon-Executive Chairman

60ANNUAL REPORT 2012

6060

6161the art of transforming strengths

Board of Directors

Mr. Tan Kok GuanNon-Executive Director

Dato’ Haji Abdul Aziz bin Dato’ Dr. OmarIndependent

Non-Executive Director

Mr. Quah Poh KeatIndependent


Ms. Kong Thian MeeCompany Secretary

Tan Sri Datuk Seri Utama Thong Yaw HongIndependent Non-Executive

Co-Chairman

Mr. Tee Choon YeowChief Executive Officer/

Executive Director

Dato’ Yeoh Chin KeeIndependent


32

4

6

5

7

1. 4. 7.

2.

5.

3.6.


DIRECTORS’

PROFILES

Tan Sri Dato’ Sri Dr. Teh Hong Piow

PSM, SSAP, SPMJ, SIMP, SSIJ, DSAP,

DPMJ, Datuk Kurnia Sentosa Pahang, JP

Hon LLD (M’sia), FIBM (M’sia), EFMIM (M’sia),

FCIB (UK), FCIS (Aust), FCMI (UK), FICM (UK),

FInstAM (UK)

Non-Executive Chairman

Directors’Profile



Tan Sri Dato’ Sri Dr. Teh Hong Piow, aged 82, was appointed

to the Board of the Company on 27 September 1971 and

has served as Chairman of the Company since then. He

is also a Non-Executive Director and Chairman of the

Company’s wholly-owned subsidiary, Lonpac Insurance

Bhd. Presently, Tan Sri Dato’ Sri Dr. Teh serves as Chairman

of the Investment Committee of the Company.

Tan Sri Dato’ Sri Dr. Teh is a banker by profession. He began

his banking career in 1950 and has 63 years experience

in the banking and finance industry. He founded Public

Bank Bhd in 1965 at the age of 35. His directorships in

other companies are as Chairman of Public Bank Bhd,

Public Investment Bank Bhd, Public Mutual Bhd, Public

Islamic Bank Bhd, Public Financial Holdings Ltd, Public

Bank (Hong Kong) Ltd, Cambodian Public Bank Plc,

several other subsidiaries of Public Bank and Tong Meng

Industries Ltd.

Tan Sri Dato’ Sri Dr. Teh had won both domestic and

international acclaim for his outstanding achievements

as a banker and the Chief Executive Officer of a leading

financial services group. Awards and accolades that he

had received include:

for Malaysia

of Financial Services in Asia 2006

Dedication and Industry 2006

for Malaysia

the Year Award 2010-2011

Malaysia

Award 2011

Malaysia

Tan Sri Dato’ Sri Dr. Teh was awarded the Medal ‘For

the Course of Vietnamese Banking’ by the State Bank of

Vietnam in 2002 for his contributions to the Vietnamese

banking industry over the past years. Tan Sri Dato’ Sri Dr.

Teh was conferred the Recognition Award 2007 by the

National Bank of Cambodia in appreciation of his excellent

achievement and significant contribution to the banking

industry in Cambodia.

In recognition of his contributions to society and the

economy, he was conferred the Doctor of Laws (Honorary)

from University of Malaya in 1989.

Tan Sri Dato’ Sri Dr. Teh had served in various capacities

in public service bodies in Malaysia; he was a member

of the Malaysian Business Council from 1991 to 1993; a

member of the National Trust Fund from 1988 to 2001;

a founding member of the Advisory Business Council

since 2003; and a member of the IPRM Accreditation

Privy Council. He is a Fellow of several institutes which

include the Institute of Bankers Malaysia; the Chartered

Institute of Bankers, United Kingdom; the Institute of

Administrative Management, United Kingdom; the Institute

of Chartered Secretaries and Administrators, Australia and

the Malaysian Institute of Management.

Tan Sri Dato’ Sri Dr. Teh attended all the 11 Board

Meetings which were held during the financial year ended

31 December 2012.



Tan Sri Datuk Seri Utama

Thong Yaw Hong PSM, SUMW, SIMP, DSAP, DIMP, JMN,

SMP, JBS, AMN

BA (Econs Hons), MPA (Harvard),

AMP (Harvard), D.Econ (Hon)

Independent Non-Executive Co-Chairman

Tan Sri Datuk Seri Utama Thong Yaw Hong, aged 82, was appointed

to the Board of the Company on 13 February 2008. He is also an

Independent Non-Executive Director and Co-Chairman of the

Company’s wholly-owned subsidiary, Lonpac Insurance

Bhd. Presently, Tan Sri Datuk Seri Utama Thong serves as

Chairman of the Audit, Nominating, Remuneration and

Risk Management Committees of the Company.

He graduated with a Bachelor of Arts (Hons)

degree in Economics from University

of Malaya and a Master’s degree in

Public Administration from Harvard

University. He attended the

Advanced Management Program at

Harvard Business School. In June 1998,

he was appointed as Pro-Chancellor of

University Putra Malaysia from which he has

retired from at the end of June 2006. In September

2006, he was conferred the Doctor of Economics

(Honorary) from University Putra Malaysia.

He has had a distinguished career with the Government of

Malaysia, primarily in the fields of socio-economic development

planning and finance. He had served in the Economic Planning Unit

in the Prime Minister’s Department since 1957 and became its Director-

General from 1971 to 1978 and thereafter served as Secretary-General,

Ministry of Finance from 1979 until his retirement in 1986.

Tan Sri Datuk Seri Utama Thong also serves as a member in the Boards of Trustees

of Program Pertukaran Fellowship Perdana Menteri Malaysia, Tun Razak Foundation

and the Malaysian Institute of Economic Research, among others. He is a member

of the National Economic Council and is also a Senior Member of the Working Group

of the Executive Committee for the National Economic Council. Tan Sri Datuk Seri

Utama Thong is a Distinguished Fellow of the Institute of Strategic and International

Studies (ISIS) Malaysia and is also a Fellow of the Institute of Bankers Malaysia.

His directorships in other companies are as Co-Chairman of Public Bank Bhd, Public

Investment Bank Bhd, Public Mutual Bhd, Public Financial Holdings Ltd, Public

Bank (Hong Kong) Ltd, Cambodian Public Bank Plc and as Chairman of Campu

Lonpac Insurance Plc and Campu Securities Plc; he is also a Director of Public

Islamic Bank Bhd, several other subsidiaries of Public Bank, Batu Kawan Bhd, Kuala

Lumpur Kepong Bhd, Glenealy Plantations (Malaya) Bhd and Malaysian South-South

Corporation Bhd. He is also the Chairman of Malaysia Property Incorporated.

Tan Sri Datuk Seri Utama Thong attended all the 11 Board Meetings which were held

during the financial year ended 31 December 2012.

Directors’ Profile


Mr. Tee Choon YeowB.Com., CA (NZ), CA (M’sia), FCPA (Aust)

Chief Executive Officer/ Executive Director

Mr. Tee Choon Yeow, aged 60, was appointed to the Board of the

Company on 29 October 1991. He is also the Chief Executive Officer of

the Company. Presently, Mr. Tee serves as member of the Investment

and Risk Management Committees of the Company.

Mr. Tee holds a Bachelor’s Degree in Commerce from the University of

Canterbury, New Zealand. He joined the Company as an Accountant

in 1980. He is a Chartered Accountant of the Institute of Chartered

Accountants, New Zealand and the Malaysian Institute of Accountants

and a Fellow of the CPA Australia.

Mr. Tee attended all the 11 Board Meetings which were held during

the financial year ended 31 December 2012.

Dato’ Yeoh Chin KeeDIMP

FCPA (Aust), F Fin (Aust)

Independent Non-Executive Director

Dato’ Yeoh Chin Kee, aged 70, was appointed to the Board of the

Company on 10 February 1978. He is also an Independent Non-

Executive Director of the Company’s wholly-owned subsidiary, Lonpac

Insurance Bhd. Presently, Dato’ Yeoh serves as member of the Audit,

Nominating, Remuneration and Risk Management Committees of the

Company.

He is a Fellow of CPA Australia and the Financial Services Institute of

Australasia.

Dato’ Yeoh began his banking career in 1961 and has 51 years of

experience in the banking and finance industry. Currently, he is a

Director of Public Bank Bhd and several companies of that Group

including Public Bank (L) Ltd (Chairman), PB Trustee Services Bhd

(Chairman), Public Investment Bank Bhd and Public Islamic Bank Bhd.

Dato’ Yeoh attended all the 11 Board Meetings which were held during

the financial year ended 31 December 2012.




Mr. Tan Kok GuanChartered Insurer

B.Sc. (Hons.), MBA, ACII, AMII


Mr. Tan Kok Guan, aged 56, was appointed to the Board of the Company on

29 October 1996. He is also the Chief Executive Officer of the Company’s

wholly-owned subsidiary, Lonpac Insurance Bhd. He joined the Company as

Deputy General Manager in 1994. He is presently not involved in any Board

Committee of the Company but is fully focused on discharging his duties and

responsibilities as the Chief Executive Officer of Lonpac Insurance Bhd.

Mr. Tan holds a Bachelor’s Degree in Science (Hons.) from the University of

London, United Kingdom and a Master of Business Administration from the

University of Hawaii. He is also a Chartered Insurer of the Chartered Insurance

Institute in London and an Associate of the Malaysian Insurance Institute in

Kuala Lumpur.

Mr. Tan attended all the 11 Board Meetings which were held during the

financial year ended 31 December 2012.

Dato’ Haji Abdul Aziz bin Dato’ Dr. OmarDIMP

ACA (England & Wales), CA (M’sia), FIBM (M’sia)


Dato’ Haji Abdul Aziz bin Dato’ Dr. Omar, aged 65, was appointed to the

Board of the Company on 9 October 2007. He is also an Independent Non-

Executive Director of the Company’s wholly-owned subsidiary, Lonpac

Insurance Bhd. Presently, Dato’ Haji Abdul Aziz serves as Co-Chairman of

the Audit Committee and member of the Nominating, Remuneration and Risk

Management Committees of the Company.

Dato’ Haji Abdul Aziz qualified as a Chartered Accountant from the Institute

of Chartered Accountants in England & Wales, and is also a Chartered

Accountant of the Malaysian Institute of Accountants.

During his previous banking experiences, he became a Fellow of the Institute

of Bankers Malaysia. His 44-year experiences to date also include the areas

of audit and accounting, taxation, property, plantation, hotelling, trading and

manufacturing, both locally and abroad. Currently, Dato’ Haji Abdul Aziz is a

Director of Public Bank Bhd and several companies of that Group including

Public Islamic Bank Bhd (Co-Chairman), Public Investment Bank Bhd, Public

Mutual Bhd, PB Trustee Services Bhd and ING PUBLIC Takaful Ehsan Bhd.

Dato’ Haji Abdul Aziz attended all the 11 Board Meetings which were held

during the financial year ended 31 December 2012.


Mr. Quah Poh KeatFCCA (UK), CA (M’sia), CPA (M’sia), ACMA (UK), Fellow MIT (M’sia)


Mr. Quah Poh Keat, aged 60, was appointed to the Board of the Company on

2 January 2009. He is also an Independent Non-Executive Director of the

Company’s wholly-owned subsidiary, Lonpac Insurance Bhd. Presently,

Mr. Quah serves as a member of the Audit, Nominating, Remuneration and

Risk Management Committees of the Company.

He is a Fellow of the Malaysian Institute of Taxation and the Association of

Chartered Certified Accountants; and a Member of the Malaysian Institute of

Accountants, the Malaysian Institute of Certified Public Accountants and the

Chartered Institute of Management Accountants.

Mr. Quah was a partner of KPMG since October 1982 and was appointed

Senior Partner (also known as Managing Partner in other practices) in October

2000 until 30 September 2007. He retired from the firm on 31 December 2007.

Mr. Quah is experienced in auditing, tax and insolvency practices and has

worked in Malaysia and the United Kingdom; his field of expertise include

restructuring, demergers and privatisation.

His directorships in other companies are as Director of Public Bank Bhd,

Public Investment Bank Bhd, Public Mutual Bhd, Public Islamic Bank Bhd,

Public Financial Holdings Ltd, Public Bank (Hong Kong) Ltd, Public Finance

Ltd, Cambodian Public Bank Plc, Campu Lonpac Insurance Plc, Campu

Securities Plc, IOI Corporation Bhd and Telekom Malaysia Bhd.

Mr. Quah attended all the 11 Board Meetings which were held during the

financial year ended 31 December 2012.

Ms. Kong Thian MeeFCIS

Company Secretary

Ms. Kong Thian Mee was appointed as Company Secretary of LPI Group on

1 August 2000. Presently, she serves as a member of the Investment Committee

of the Company.

Currently, she is serving as a Secretary for various Board Committees; and

since 2000, heads the Group’s Secretariat Department. Ms. Kong is also a Joint

Company Secretary of Campu Lonpac Insurance Plc, an associated company.

Ms. Kong is a Chartered Secretary (ICSA) and is a Fellow of The Malaysian

Institute of Chartered Secretaries and Administrators.

NONE OF THE DIRECTORS HAS:



The global economy is expected to grow moderately in 2013. The economic outlook

appears less encouraging with uncertainty in the major advanced economies weighing down

the economic prospects. Risks from the unresolved sovereign debt crisis in Europe and fiscal

health in the United States of America remains a major concern. Growth in most Asian economies,

however, is expected to remain healthy, underpinned by sustainable domestic demand.

For the Malaysian economy, domestic demand will continue to be the anchor of growth. Healthy

labour market and moderate inflation will continue to support private consumption. The various

measures proposed for 2013 Budget addressing the rising cost of living would further stimulate

private consumption. The ongoing implementation of Economic Transformation Programme (“ETP”)

continues to drive private investments. On the supply side, growth is expected to be broad-based.

The construction sector is expected to expand strongly on account of the acceleration of ongoing

construction-related projects from the ETP. Various initiatives under the ETP will also continue to

underscore growth in the services sector.

LPI Capital Bhd (“LPI”) and its wholly-owned subsidiary, Lonpac Insurance Bhd (“Lonpac”) have

demonstrated resilience in weathering economic turbulence and adversity. The Group was able to

draw on its financial strength and competency to deliver another year of increased profitability and

improved asset quality in 2012. Committed to the practice of good business ethics and excellent

delivery of services to all our stakeholders, the Group has demonstrated consistent efficiencies and

cost-effectiveness to return yet another set of positive results to all its shareholders.

We, the Board of Directors (“Board”) of LPI are pleased to present the Annual Report and the Audited

Financial Statements of LPI Group for the financial year ended 31 December 2012.

Letter To Stakeholders

TO OUR SHAREHOLDERS

Delivering Results

The year 2012 continued to be a successful year for LPI

Group despite the uncertainties in the global market and

several catastrophic events. Lonpac set a new milestone

for the Group with its gross premium income crossing

the RM1 billion mark for the financial year ended 31

December 2012. Pre-tax profit surged to a record high

of RM214 million, representing an improvement of 7%

over the preceding year on the back of the significant

increase in the operating revenue of RM1.04 billion.

Net profit attributable to shareholders grew by 8% to

RM166.9 million that translated to an improved earnings

per share of 75.8 sen and a net return on equity of 12.2%

in 2012. The growth in both its operating revenue and

pre-tax profits was mainly attributed to its wholly-owned

subsidiary, Lonpac. We are pleased to note that Lonpac’s

robust risk management in the areas of underwriting,

business development and claims management have

enabled the Group to register underwriting surplus for

all classes of risks underwritten. The underwriting results

continued to improve by 10.2% to RM151.9 million from

RM137.9 million in 2011.



Consistent Performance Over Medium-Term

The Group’s outstanding and resilient track record

over the years is a testament to its consistently sturdy

financial and business performance over the medium-

term. Notwithstanding the market challenges and global

financial crisis, the LPI Group managed to:

RM792.4 million in 2007 to RM2.7 billion

Strategic Business Direction Going Forward

The LPI Group’s core business focus remained with its

to pose challenging economic environment both

domestically and globally. The global insurance industry

was adversely affected by the numerous catastrophic

well as more liberal foreign equity participation policy had

changed the landscape of the local insurance industry and

made it more challenging. Notwithstanding this, the Group

is well prepared to face the challenges and also the need

Sustaining Momentum For Organic Growth

performance will be driven and inspired by the strategic

Lonpac will continue to pursue the strategy of strong

organic business growth that has generated remarkable

increase in its market share whilst upholding its tradition

of prudent asset quality management. We will intensify our

business development strategies to acquire more business

opportunities and tap on the wide market. In line with

add to our broad branch network. With the establishment

productivity plans and enabled greater penetration into the

selected profitable markets.

The Group will endeavour to improve its effectiveness in

operation through maintaining cost efficiency at all levels

of work processes. Amongst the initiatives undertaken in

this direction is the development of human capital. The

staff force represents the most valuable asset of the Group

in delivering healthy bottom line growth and long-term

value to shareholders. Notwithstanding having a bigger

work force, the Group had successfully maintained its

Keeping Strong And Healthy Financial Position

The Group’s statement of financial position continued to

remain strong and healthy as its total assets increased to

increase was primarily driven by the sturdy growth in profit

Group’s total portfolio in available-for-sale financial assets

the volatility in the equity market and low interest rates.

2007 2012 Variance

RM’Million RM’Million


Maintaining Value Of Shareholders’ Investment

The Board views enrichment of shareholders’ value

as the ultimate measure of the Group’s success. The

Group’s ability to deliver consistent financial performance

as evidenced by its unbroken profitability track record

underpinned the value of the investment of shareholders

in LPI. Strong capital adequacy ratios, positive business

growth, best asset quality and consistently high dividend

yields are amongst some of the positive attributes of LPI’s

shareholder value.

The LPI Group remains fully committed to maintaining

superior shareholder value by enhancing the efficiency of

its capital employed and increasing its return on equity,

pursuing a consistent dividend payout policy as well as

upholding excellent corporate governance.

Consistent Dividend Payout

LPI will pay a 2nd interim single tier dividend of 50 sen per

share on 4 February 2013. The Board of Directors does

not propose any final dividend for the financial year ended

31 December 2012.

The 2nd interim single tier dividend of 50 sen per share

together with the 1st interim single tier dividend of 15

sen per share paid on 31 July 2012 will mean that

shareholders will receive a total net dividend of 65 sen

per share for the financial year ended 31 December 2012.

The total net dividend of 65 sen per share amounting to

RM143.2 million, representing 85.8% of the Group’s net

profit for 2012. This translates into a net dividend yield

of approximately 4.9% based on the previous year’s

average market price.

The Group endeavours to maintain a consistent and

regular dividend payout taking into account the allocation

of capital resources to support its business growth and

expansion plans.

Proactive Capital Management

Lonpac continued to register Capital Adequacy Ratio

(“CAR”) higher than its Individual Target Capital Level and

the supervisory target CAR set by Bank Negara Malaysia

(“BNM”) in line with the RBC Framework and Guidelines

on ICAAP for Insurers issued by BNM. The increased

and robustness of risk management infrastructure but also

reinforced its efficiency in capital utilisation by maintaining

a capital adequacy level that commensurate with its risk

profiles and business growth.

The Group has updated its Capital Management Plan

(“CMP”) in line with the Guidelines on ICAAP for Insurers

issued by BNM which became effective from 1 September

2012. The CMP aims at optimising the efficient and effective

use of resources and capital in order to maximise the return

on equity.

The LPI Group has successfully enhanced its capital structure

to support the Group’s rapidly growing business through

proactively managing its capital to meet the challenges of

the capital requirement without compromising on its organic

growth strategies. The Group’s strong and consistent

ability to support the capital requirements for expansion on

its core business without the need for fresh capital injection

from shareholders. Going forward, the Group will continue

to effectively manage its capital structure and maintain the

while maximising shareholders’ value.

Superior Returns To Shareholders

The LPI Group continued to deliver superior returns to

shareholders, both in the medium and long-term. The

consistent return on equity and dividend payout combined with

efficient capital engagement and strong corporate governance

have continuously benefited the shareholders of LPI.

Over the medium-term period of 5 years, a shareholder of

LPI who purchased 1,000 LPI shares at a price of RM12.10

per share at the beginning of 2008 or an investment of

RM12,100 and held them for 5 years to the end of 2012

would have received gross dividends amounting to

RM5,403 and would have held 1,600 LPI shares as at the

end of 2012. At the price of RM14.54 per ordinary share at

the end of 2012, the shareholder would have shares worth

RM23,264 which together with the gross dividends of

RM5,403 and would give the shareholder an exceptionally

high annual rate of return on investment of 20.6% or a total

return of 124% for the 5-year period.



If a shareholder of LPI had bought 1,000 shares in LPI

when it was listed in 1993, and assuming the shareholder

had subscribed for every right issue to date and had not

sold any of the shares, she/ he would have, at the end

of 2012, 8,640 LPI shares worth RM125,626, based on

the share price of LPI shares of RM14.54 as at the end of

2012. In addition, she/ he would have also received a total

gross dividend of RM51,846 over the years which LPI has

unfailingly paid every year since its listing in 1993. With a

capital outlay of RM10,730, including subscription for all

rights issues, the total return to this shareholder would be

RM166,742 or a remarkable average rate of return of 26.2%

annually for each of the 19 years that this shareholder has

held the shares in LPI since it was listed in 1993 or a total

return of 1,554% for the period.

TO OUR CUSTOMERS

BrandLaureate BestBrands In Financial Services – General

Insurance

Lonpac was conferred the Best Brands in Financial

Services – General Insurance in The BrandLaureate

BestBrands Awards 2011-2012 for Corporate Branding

by the Asia Pacific Brands Foundation for the second

consecutive year.

Meeting Customers’ Needs

With increasingly well-informed customers and continued

evolution of products and services, customers have

the luxury of choosing their preferred financial service

providers. It is the Group’s priority to meet customers’

expectations by proactively identifying and fulfilling their

needs with effective insurance solutions. The challenge

is to convince our customers of the importance of being

protected with the right insurance policy and fulfil customer

service level expectations.

Moving forward, the Group constantly reviews and

repositions its business strategies to include greater

customer awareness, innovative insurance solutions as

well as better product and services. A key difference in

trying to capture the market is the manner in which a

product or service is delivered and how best customers

are served. Thus, the Group will endeavour to pursue

excellent service to sustain its competitive edge.

The Group’s record of service excellence continued

to be validated in 2012 with the conferment of Chubb

Multinational Solutions Group Outstanding Affiliate Service

Award 2011 by the Chubb Multinational Solutions for the

fifth consecutive year. Such recognition reflects our efforts

in service excellence and will motivate us further in our

quest for higher level of service standards.

Enhancing Customer Service Infrastructure

Significant resources are invested in enhancing customer

service infrastructure to promote a high standard of

customer service delivery and stay ahead in a borderless

consumer market. The Group also remains focused in

positioning itself as a responsive insurance company

through its customer service infrastructure.

One of the cornerstone of the Group’s customer service

infrastructure is the continuous investment in Information

and Communication Technology (“ICT”). We constantly

review our ICT architecture for high operational efficiency,

quality and timeliness of service delivery. These include the

provision of an E-Portal (corporate website) which serves

as a communication channel for existing and potential

customers as well as a base for the implementation

of Customer Relationship Management (“CRM”). The

E-Portal allows customers to register as users which

enable them to access their insurance policies with Lonpac

online and perform various online insurance transactions.

CRM provides effective collaboration amongst various

departments where information on customers can be

shared and accessed in a more structured manner for

faster communication amongst the departments.

In addition, we constantly enhance our web interface in

delivering information and services to our customers and

agents (including providing more features and interactivity

to our online presence). The Group will continue to

pursue service excellence to provide our customers with

accessibility, comfort and convenience.



TO OUR STAFF

Our People Are Our Most Important Asset

We acknowledge that the noteworthy achievements

of the LPI Group today could not have been achieved

without a team of committed, dedicated, and competent

employees who are focused on a common goal of

performance excellence. The Group has continuously

nurtured, trained and proactively managed its human

capital to produce the best in each and every staff. The

staff force collectively represents the most invaluable

asset of the LPI Group. Hence, we are fully committed

to creating value and building growth for our people

indefinitely.

Strengthening The Staff Force

Throughout the year 2012, we continued to strengthen

and expand our staff force to support our business

expansion strategies. The Group is committed to

developing its human capital and increasing its regional

667 staff from 611 staff in 2011. It is the Group’s strategy

to invest in the long-term development of our staff and

provide them with a sense of job security and good

career prospects. This eventually helps us to inculcate

a higher sense of belonging and commitment to the

Group.

Skill And Knowledge Development

The Group believes that learning is a life-long experience

and has allocated significant management and financial

resources to enhance the long-term value of its human

capital. During the year under review, we conducted

several seminars/ conferences for our staff ranging from

officer level to higher management level, each covering

different aspects of hard and soft skills required for

improving their technical competencies. Competent and

skilful staff will enhance the Group’s ability to redeploy

staff without compromising on service delivery standards.

The Group’s investment in developing the quality of skills

and knowledge of its human capital fulfils the Group’s

structured management succession planning objectives

and also prepares staff for career progression within the

Group. A well-trained, skilful and knowledgeable workforce

is more adaptable to the changing needs of the Group in

its quest for excellence, giving the Group a competitive edge.

On this note, the LPI Group’s overall staff turnover rate in

2012 remained stable at 9.75%.

Structured Management Succession

The LPI Group has established a structured succession

planning process for its senior management staff in all

business areas. Instituted for many years, suitable candidates

are identified and earmarked for the succession of every

senior managerial position. We nurture these candidates with

the relevant training and skills development programmes and

job related exposures to the related areas of the positions

and responsibilities being planned for them. In addition, the

Group promotes competitive benchmarking of performance

to encourage emerging talents to create a robust pipeline of

candidates for succession planning.

Rewarding Our People

The Group’s human capital development is reinforced by

a fair and transparent performance-based remuneration

system and a meritocracy-based career progression

path. We entrench a talent development framework in

our culture of excellence and success to keep our staff

highly engaged and motivated to perform to the peak of

their capabilities. Rewards are closely and transparently

correlated to the delivery of superior performance as

measured by the staff’s contribution to the Group’s core

business performance. Career progression is given based

on staff’s demonstrated work ethics, talent and ability on

assigned responsibilities. The reward scheme is carefully

and consistently aligned with the Group’s prudent risk

profiles. Through the Group’s leadership development

programmes, we have successfully produced top talent at

senior levels and attracted new talent as well.

Increasing Productivity

Through its constant investment in human capital

development in staff training and the transparent and

fair performance-based remuneration structure, the

productivity of LPI Group’s staff force continued to rise.

The productivity of the Group’s staff force as measured

by the standard industry indicators continued to rise

significantly as the gross written premiums per employee

rose from RM931,000 in 2003 to RM1,550,000 in 2012.



Staff Values

LPI Group remained committed to upholding and

inculcating the right ethical corporate values and a culture

of trust, honesty and integrity in each of its staff. The

Group, being primarily in the insurance industry where

integrity and trust are of utmost importance is governed

by the Code of Ethics issued by Persatuan Insurans Am

Malaysia (“PIAM”) which has been codified in the Staff

Disciplinary Handbook.

The Group also promotes an environment of exemplary

corporate conduct and meticulous regulatory compliance

to which each and every staff is held accountable. The

uncompromising adherence to the Group’s policy of zero

tolerance of dishonesty and lack of integrity is necessary

to sustain the trust of the insuring public. This corporate

philosophy is one of the key drivers in outperforming our

competitors and uphold the trust of the public implicit in

the role of the Group as a trusted and respected leading

financial institution in Malaysia and in the Asia Pacific

region.

Caring For Our Staff

While pursuing its corporate goals, LPI Group has never

neglected the well-being of its staff and their family. Their

welfare is taken care of through the provision of a fair and

competitive salary structure and a host of staff benefits.

Various measures are adopted to provide immediate

financial incentives to staff in view of rising inflation and

the cost of living.

TO OUR COMMUNITY

The Group has continuously played its role in the

community by conducting its business activities ethically,

responsibly and prudently. Serving the community is a

focal area of the Group’s Corporate Responsibility with the

aim of caring for the well-being of society at large.

Contribution To The Country’s Economy

LPI Group contributed to the development and maturity of

the financial system with its continuous profitability. The

Group has also been contributing to the fiscal revenue of

the country with tax payments totalling RM225 million in

the five years since 2007, with the Group paying RM45

million in 2012 alone.

The Group’s core business strategies in providing

innovative and affordable insurance solutions have

benefited the wider community and contributed to the

socio-economic development of the country. Given the

continued profitability performance expected in the next

few years as envisaged by the Group’s medium-term

scenario planning, the Group will contribute significantly

to the finances of the country.

Community Activities

The LPI Group continued with its corporate responsibility

initiatives and took part in various social activities in

support of the community. These included organising

charity fund raising activities for children with special

needs and contributing financially to sporting events. We

successfully organised a Blood Donation Campaign in

support of Tabung Darah Negara that attracted donors

from among our staff as well as the general public.

With the aim of reducing our carbon footprint,

environmentally themed activities were undertaken to

create awareness among staff and the general public on

the importance of conserving Mother Nature. Our initiatives

included organising an environmental project, Love

the Earth, Green Mid-Autumn! to create environmental

awareness, providing recycle bins at our Head Office to

cultivate recycling habits among staff, and organising

jungle and garden walks for the staff to appreciate Mother

Nature as well as participating in the World Wild Fund for

Nature’s Earth Hour 2012.



AWARDS AND RECOGNITION

LPI Group was conferred numerous awards and

accolades for its industry excellence, superior

shareholder value and outstanding service level. In

2012, the Group’s efforts for excellence continued to

be recognised by reputable domestic and international

publications and other third party organisations such as:

For industry excellence

BrandLaureate BestBrands in Financial Services –

General Insurance for the second consecutive year.

For superior shareholder value

The Edge Billion Ringgit

Club since 2010.

For outstanding service level

Chubb Multinational Solutions Outstanding Affiliate

Service Award 2011 for the fifth consecutive year.

These awards and accolades will further motivate and

reaffirm the commitment of the Group and its entire staff

to continue its relentless pursuit of excellent performance

and the delivery of distinctive value to all its shareholders.

MEDIUM-TERM SCENARIO PLANNING

The Group is guided by its medium-term planning

processes in its effort to achieve the Group’s Corporate

Mission and sustain the Group’s leading position in

the market. The planning processes include putting

into place medium-term plans for the next 6 years to

deliver continued growth and profitability as well as

to provide distinctive value for all its stakeholders. In

setting its medium-term plans, the Group assessed the

performance of its general insurance activities in Lonpac

as compared to the industry benchmark.

The Key Performance Indicators (“KPIs”) of Lonpac and

the actual delivery in 2012 against its KPIs as compared

(Source: Benchmark Indicators for General Insurance

Companies for the Period January-December 2011 issued

by Bank Negara Malaysia)

In the review of the Group’s performance, the KPIs included

in the medium-term plans are monitored and measured.

Barring unforeseen circumstances, the Board is confident

that the envisaged growth and profitability targets in the

medium-term plans will be achieved.

PROSPECTS

While facing heightened uncertainties in the external sector,

the Malaysian economy has made further progress towards

becoming a high-income and developed nation in 2020.

The outlook for the Malaysian economy remained positive

with the implementation of the National Transformation

Policy. The 2013 Budget is geared towards cushioning the

domestic economy from the spillover of the weaker external

sector. The Malaysian economy is expected to grow further

in 2013 within the range of 4.5% to 5.5% mainly supported

by improving export and strong domestic demand. These

positive developments augur well for the insurance industry

and provide a strong foundation for growth in 2013.

Lonpac was able to successfully renew its treaty reinsurance

arrangement for the next underwriting year 2013 well before

portfolio. With its resilient financial performance, strong

and healthy financial position and commendable capital

adequacy ratio, Lonpac has the capacity to compete

effectively in its core insurance business and is confident of

emerging as one of the most established and well managed

insurance companies in the insurance industry. Prospects

for the year 2013 therefore remain bright.

Key

performance

indicators

Actual in 2012

Latest available

industry

benchmark

Operating Margin

Ratio 20.7 19.0

Net Claims

Incurred Ratio 47.5 61.0

Gross Written

Premiums Growth 13.9 10.9



We are pleased to announce that A.M. Best, a worldwide

insurance rating and information agency, affirmed the

financial strength rating of “A-” (Excellent) and the issuer

credit rating of “a-” to Lonpac on 11 October 2012. The

and consistently stable operating performance. The ratings

also recognise Lonpac’s strong risk culture and strong risk-

adjusted capitalisation.

OUR APPRECIATION

We wish to thank our stakeholders for their continued support

and confidence in the LPI Group that had enabled us to mark

a major milestone with gross premium income surpassing

RM1 billion.

We wish to express our sincere gratitude to all our valued

agents, brokers, reinsurers, policyholders and other business

associates for choosing us as their preferred financial service

provider and for their continued contributions towards the

success of the Group.

To the Management and all the staff of LPI Group, we

wish to place on record our deepest appreciation for their

invaluable contributions, loyalty, diligence and whole-hearted

commitment to the continuing success of the Group.

Last but not least, the Board and Management would also

like to thank Bank Negara Malaysia and all other relevant

Regulatory Authorities for their invaluable advice, guidance

and support.

Tan Sri Dato’ Sri Dr. Teh Hong Piow

Chairman

Mr. Tee Choon Yeow

Chief Executive Officer

Mr. Tan Kok Guan

Director

Mr. Quah Poh Keat

Director

8 January 2013

Tan Sri Datuk Seri Utama Thong Yaw Hong

Co-Chairman

Dato’ Yeoh Chin Kee

Director

Dato’ Haji Abdul Aziz bin Dato’ Dr. Omar

Director


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2012 LPI Capital Annual Report: Letter to Stakeholders

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