LPI Capital Bhd : Integrated Annual Report 2021

BUILDING A MORE

SUSTAINABLE TOMORROW

I N T E G R A T E D A N N U A L R E P O R T 2 0 2 1

		About	Our	From	Our Strategic	EES Performance	Our	Financial	Appendices
		This Report	Business	Our Leadership	Context	Review	Governance	Report

LPI CAPITAL		Integrated Annual	Integrated Annual		LPI CAPITAL
BHD		Report 2021	Report 2021		BHD

Vision

To be the preferred premier insurance solutions provider.

INSIDE THIS REPORT

BUILDING A MORE SUSTAINABLE TOMORROW

The cover of our Annual Report reflects our belief that a sustainable tomorrow requires a sustained integrated approach from all of us. This idea is found in the coming together of three independent lines representing the foundations of good sustainable practice - Environmental, Social and Governance - to create a union at the locus of their meeting. LPI Capital Bhd ("LPI") strives to create the conditions necessary where such an integration can occur and we do so proactively through our sustainability practice as well as in our efforts to effect a greater sense of social responsibility within our stakeholders. This is in line with LPI's fundamental business philosophy of prudent, organic growth to ensure the long-term futures of our organisation and our stakeholders.

Corporate Mission

1	Our primary focus is to provide innovative insurance products
supported by customer-centric service excellence. We aim to provide

our insured an easy channel for all their insurance needs.

Our brand is representative of the way we conduct ourselves and

2 the approach to organisational development. We aim to create an environment for our people that is fair, caring and accountable.

Our drive is to create value for our stakeholders, anchored to our vision

3 and corporate mission. We strive for sustainability through financial and technical strength based on recognised and proven standards.

Our Core Values

Represent the way we conduct ourselves and our responsibilities to our insured, our stakeholders, our people and our community.

L	Aspire to be the LEADER in the insurance industry in Malaysia
and in the region.
O	Commitment to OPERATIONAL EXCELLENCE guided by
integrity and professionalism.
N	Creating NEW AND INNOVATIVE market-relevant insurance
products.
P	PROVIDING a fair, caring and merit based working
environment.
A	ADOPTING a proactive and accountable approach to
stakeholders.

1 About This Report

02

2 Our Business

Key Highlights for the Year	04
Our Investment Case	05
- Performance at a Glance
-	Corporate Profile
-	Group Corporate Structure

3 From Our Leadership
	Note from Our Chairman	11
	Management Discussion & Analysis	15

4 Our Strategic Context
	Industry and Market Overview	36
	Determining Materiality	40
	Our Value Creation Model	43
	Understanding Our Risks	46

5 EES Performance Review

Our Sustainability Performance

48

-	Marketplace Development
- Workplace Management
-	Community Development

6 Our Governance
	Our Board Diversity	70
	Who Governs Us	72
	Who Leads Us	78

• Key Group Management
• Group Management

Corporate Governance Overview Statement 80

• Leadership and Effectiveness
• Accountability
• Effective Communication with Stakeholders Bursa Malaysia Securities Berhad Listing

Requirements Compliance Information	99
Statement on Risk Management and
Internal Control	100

7 Financial Report

Financial Statements

106

8 Appendices

Corporate Information	247
Analysis of Shareholdings	248
Share Capital	252
Particulars of Property Held by the Group	256
Group Corporate Directory	257
Notice of Annual General Meeting	260
Global Reporting Initiative ("GRI")
Content Index	263
Proxy Form

C

CRAFTING a premier insurance brand identified for good

The digital version of LPI Capital Bhd's

corporate governance and corporate responsibility.

Integrated Annual Report 2021 is available on

our website. Scan the QR Code.

- Environmental Conservation

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		About	Our	From	Our Strategic	EES Performance	Our	Financial	Appendices
		This Report	Business	Our Leadership	Context	Review	Governance	Report

LPI CAPITAL		Integrated Annual		About This	About This		Integrated Annual		LPI CAPITAL
BHD		Report 2021		Report	Report		Report 2021		BHD

ABOUT

THIS REPORT

This document is LPI Capital Bhd's ("LPI") integrated annual report, which has been prepared in compliance with the Integrated Reporting Framework set by the International Integrated Reporting Council ("IIRC"). It provides a comprehensive and integrated account of the activities of the LPI organisation, including those of our wholly-owned subsidiary, Lonpac Insurance Bhd ("Lonpac"), which is responsible for all aspects of our insurance business. LPI and Lonpac are collectively known as LPI Group ("the Group") in this document.

This integrated annual report, in addition to its primary function as a report of our activities, serves as a reflection of our continuing efforts to improve our sustainability and governance practices. Specifically, the report this year has been prepared to better comply with international guidelines and standards to facilitate greater disclosure and benchmarking. It also discloses details of our plan to incorporate an enhanced and more formal sustainability framework into the Group in line with international guidelines.

This document is part of our public commitment made in 2018 to provide a more holistic report that analyses our value creation role as a leading insurance provider in Malaysia. We aim to give our stakeholders greater insight into our processes and the future direction of the Group in relation to our operating context and prospects moving forward. This report also discusses the impact of the ongoing COVID-19 pandemic on our operations and our prospects in the near- and middle-terms.

Reporting Scope and Boundary

The scope and boundary of this report are guided by the Framework. These delimitations have been prescribed to ensure that the report is comprehensive while remaining sufficiently focused to give our stakeholders a clear picture of our activities as well as our prospects over the short-, medium- and long- terms. This includes, but is not limited to, discussions of our value creation process, our impact on Economic, Environmental and Social ("EES") matters and the Group's future prospects given the existing and expected operating conditions. In short, this integrated annual report considers our sustainability issues in light of our larger value creation activities.

While our eventual aim is to harmonise the scope and boundary of our business operations and sustainability issues to create one fully integrated document, we continue to retain a separate sustainability section in this year's report, as our integration work is still ongoing. We recognise the principle that the goals of sustainability and those of our business operations should be aligned and we have taken the necessary steps to bring about this alignment. Nevertheless, unless stated otherwise, all terminology and concepts used should be considered to be applicable universally throughout this report.

Key Concepts and Definitions

The production of this integrated annual report is guided by several key concepts and definitions, including the following:

MATERIALITY

The principle of materiality relates to the process of identifying and assessing sustainability matters that are of the greatest importance to our organisation and stakeholders.1 These include the legitimate needs and interests of our stakeholders, ranging from our shareholders and employees to our regulators and our customers. The application of this principle ensures that the information included in this report reflects the impact and outcomes of our value creation activities and the sustainability of those activities. It also ensures a discipline of focus in our reporting activities to ensure that only relevant outcomes are incorporated into our discussions.

VALUE CREATION

The concept of value creation refers to our processes and activities that create outcomes for our stakeholders. These processes and activities consume and exhaust resources, i.e. capital inputs, to create value for our stakeholders. Values can be understood within this context to be financial, e.g. dividends, salaries, claim payouts or non-financial, e.g. quality of service, employee welfare, strong corporate governance. To ensure the sustainability of our value creation activities, part of the value created by our processes must include the replenishment of capital inputs that are consumed in the value creation process. For example, some of our value creation activities must replenish the financial resources that are consumed during the undertaking of other value creation activities such as the payment of dividends and salaries and the marketing and promotion of our products and services.

INTEGRATED THINKING

Integrated thinking is defined by the IIRC as "the connectivity and interdependencies between the range of factors that affect an organisation's ability to create value over time" through considerations such as:

• the capitals that the organisation uses or affects, and the critical interdependencies, including trade-offs, between them;
• the capacity of the organisation to respond to key stakeholders' legitimate needs and interests;
• how the organisation tailors its business model and strategy to respond to its external environment and the risks and opportunities it faces; and
• the organisation's activities, performance (financial and other) and outcomes in terms of the capitals - past, present and future.2

1. Materiality as defined in Bursa Malaysia Securities Berhad's Sustainability Reporting Guide (2nd Edition).
2. The International Framework. Available from https://www.integratedreporting.org/wp-content/uploads/2021/01/ InternationalIntegratedReportingFramework.pdf

ABOUT

THIS REPORT

Reporting Frameworks

The preparation of this report has been guided by the following reporting frameworks:

• The International Integrated Reporting Framework
• The Malaysian Code on Corporate Governance
• Bursa Malaysia Securities Berhad's Main Market Listing Requirements
• Bursa Malaysia Securities Berhad's Sustainability Reporting Guide (2nd Edition)
• Malaysian Companies Act 2016
• The Malaysian Financial Reporting Standards ("MFRS")
• The International Financial Reporting Standards ("IFRS")
• The Global Reporting Initiative ("GRI") Sustainability Standards
• The Sustainable Accounting Standards Board ("SASB")
• The AA1000 AccountAbility Principles.

Forward-Looking Statements

This report contains forward-looking statements in relation to the Group's plans, objectives, expectations, future financial condition, performance, results and estimates of future cash flows and costs. As projections of future conditions, all forward-looking statements cannot be absolutely reliable as they relate to future events and circumstances that are beyond our control, including economic and business conditions, market fluctuations such as changing interest rates and exchange rates, the policies and actions of regulatory authorities and the impact of competition, as well as the impact of tax and other legislation and regulations in the jurisdictions in which LPI and its affiliates operate.

Due to these variables, our actual future financial condition, performance and results may differ materially from the plans, goals and expectations set forth in this integrated annual report. It is important to note that we undertake no obligation to update the forward-looking statements contained in this document or any other forward-looking statements should conditions change in the future. Nothing in this report shall constitute an offer to sell or the solicitation of an offer to buy securities.

Board Approval

LPI's Board of Directors ("the Board") is confident that all efforts have been made to provide a thorough and comprehensive disclosure of our activities during the year under review. This report was prepared in line with the guidelines provided by Bursa Malaysia Securities Berhad as well as the Framework, and the report as a whole has been reviewed and endorsed by LPI's Board. The Board is represented on the Sustainability and Integrated Reporting Committee by its Executive Director Mr. Tan Kok Guan.

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		About	Our	From	Our Strategic	EES Performance	Our	Financial	Appendices
		This Report	Business	Our Leadership	Context	Review	Governance	Report

LPI CAPITAL		Integrated Annual		Our	Our		Integrated Annual		LPI CAPITAL
BHD		Report 2021		Business	Business		Report 2021		BHD

KEY HIGHLIGHTS FOR THE YEAR

OUR INVESTMENT CASE

Performance At A Glance

FINANCIAL HIGHLIGHTS

EES HIGHLIGHTS

	GROUP
FINANCIAL HIGHLIGHTS	2021	2020

Gross Written Premiums

RM1.6 billion

Profit Before Tax

RM437.3 million

Return On Equity

16.1 %

Return On Assets

7.0 %

Net Dividend Per Share

74.0 sen

NON-FINANCIAL HIGHLIGHTS

ECONOMIC

Job creation

Total number of

26

jobs created

100%

of jobs awarded to local citizens

Awards and Recognition

ENVIRONMENTAL

Environmental Conservation

Optimised the ratio of paper

that we used over the number of documents issued

SOCIAL

COVID-19 Pandemic

Made contributions

towards the communities and underprivileged populations throughout the pandemic

OPERATING RESULTS (RM'000)
Operating Revenue	1,717,734	1,621,592
Gross Written Premiums	1,561,037	1,550,625
Operating Profit	436,139	432,408
Profit Before Tax	437,316	433,565
KEY STATEMENTS OF FINANCIAL POSITION DATA (RM'000)
Total Assets	4,894,804	4,519,706
Total Liabilities	2,753,782	2,444,238
Total Equity	2,141,022	2,075,468
FINANCIAL RATIOS (%)
Profitability Ratios
Return on Equity	16.1	16.2
Return on Assets	7.0	7.5
Operating Margin	25.4	26.7
Net Claims Incurred	36.5	41.2

Gross Written Premiums Income Per Employee (RM'000)

2021	1,908
2020	1,903
2019	1,875
2018	1,830
2017	1,799
2016	1,656
2015	1,695
2014	1,630
2013	1,609
2012	1,550

No. of Employees

818

No. of Policies Issued

2,241 per employee

MSWG-ASEAN CORPORATE GOVERNANCE AWARDS 2020

Industry Excellence Award

(Financial Services)

by the Minority Shareholders Watch Group

NACRA 2021 EXCELLENCE AWARDS

Silver Prize

(Companies with RM2 Billion to RM10 Billion in Market Capitalisation)

by the National Annual Corporate Awards

Productivity Ratios
Gross Written Premiums Income per Employee (RM'000)	1,908	1,903
No. of Policies Issued per Employee	2,241	2,608

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		About	Our	From	Our Strategic	EES Performance	Our	Financial	Appendices
		This Report	Business	Our Leadership	Context	Review	Governance	Report

LPI CAPITAL		Integrated Annual		Our	Our		Integrated Annual		LPI CAPITAL
BHD		Report 2021		Business	Business		Report 2021		BHD

OUR INVESTMENT CASE

Corporate Profile

LPI Capital Bhd ("LPI") is an investment holding company listed on the Malaysian stock exchange. Previously known as the London & Pacific Insurance Company Bhd, LPI was founded on 24 May 1962 as a private limited company and registered as an approved

OUR INVESTMENT CASE

Corporate Profile

The combination of these attributes has helped us develop unique key value propositions for our stakeholders that differentiate us from our competitors. These include the following:

insurer on 9 April 1963 under the Malaysian Insurance Act 1963. LPI was subsequently listed on the erstwhile Second Board of the Malaysian stock exchange on 8 January 1993 before being transferred to the Main Market of Bursa Malaysia Securities Berhad ("Bursa Securities") on 17 January 1997.

A corporate rationalisation scheme held on 1 May 1999 transferred the entirety of LPI's Malaysian and Singaporean insurance business to our wholly-owned subsidiary Lonpac Insurance Bhd ("Lonpac"). To this day, Lonpac continues to be the operational arm for our insurance activities in Malaysia and Singapore. We also have a presence in Cambodia through Campu Lonpac Insurance Plc, in which LPI holds a 45% stake. Collectively, these companies are referred to in this document as the LPI Group ("LPI Group" or "the Group").

LPI has emerged as a market leader in Malaysia since our inception over 50 years ago, judiciously weathering all challenges, from the increasingly competitive insurance market to the current COVID-19 pandemic. At the same time, we continue to expand our business in Singapore and Cambodia, markets which have high growth potential. While these locales are challenging-due to the high degree of competition in Singapore and the relative infancy of the Cambodian insurance industry- we remain confident that these strategic markets will increase their contributions to the Group's overall performance in the years to come.

We are renowned for the reliability and trustworthiness of our products and services, which we attribute to our business philosophy of prudential risk management and our practice of prioritising customer needs. Meanwhile, we attribute the longevity of the Group to our ability to innovate and adapt to changing market conditions, as well as to our ability to maintain the highest standards of ethical and corporate governance at all levels of our organisation.

Developing a Diverse Portfolio of Products and Services

We are committed to the provision of comprehensive insurance coverage to customers from all walks of life. As individuals, our customers have different needs and varying levels of income; nevertheless, everyone deserves the financial security and peace of mind that comes from affordable insurance. To this end, we place great emphasis on ensuring that our products and services remain relevant and are accessible to all through extensive market research and collaboration with industry partners.

While we prioritise the growth of certain classes of business within the insurance industry, we are nevertheless committed to the growth of our entire portfolio, and take a similar prudential and comprehensive approach in developing each class. To ensure that all classes are adequately served, the Group regularly collaborates with local and foreign partners and reinsurers to give our customers the best coverage at competitive prices.

Presently, the Group offers insurance solutions in the following areas:

1. Employee Benefits
2. Health Insurance
3. Liability Insurance
4. Motor Insurance
5. Marine Insurance
6. Pecuniary Insurance
7. Personal Accident Insurance
8. Project Insurance
9. Property Insurance

10 Trade Credit Insurance

Maintaining an Extensive Distribution Network

The Group maintains an extensive product distribution network that is anchored on our stable of agents who have been carefully nurtured and developed to provide effective and reliable insurance solutions to our customer groups. As members of our frontline representatives, our agents are invaluable in communicating new product information to customers and researchers who funnel customer feedback to us. Their presence helps ensure that our product development is in line with changing customer needs, thereby helping us better tailor products and services for specific market groups.

Complementing these efforts are our in-house marketing and research teams who are critical in identifying new distribution channels for further business growth. It is crucial that we stay up to date on new developments at all times in order to capitalise on new opportunities as they arise. A good example is the increasing demand for sustainability-themed assets, which represent new, untapped potential for the insurance sector. We are currently investigating how we can leverage this new trend to expand our product offerings and establish new distribution channels.

The Group has also intensified our efforts to make greater use of digital technology to strengthen and broaden our distribution. As online and mobile transactions become increasingly popular among customers, we have similarly developed our internal information technology ("IT") resources to better meet their needs. It is with this in mind that we embarked on our Digital Transformation plan, which aims to establish our online network as a key channel of distribution. Indeed, the importance of digital technology has been underlined substantially by the COVID-19 pandemic that effectively disrupted almost all forms of physical communication.

At present, our physical distribution channel comprises 21 Lonpac branches throughout Malaysia and one in Singapore. We also have an associated company in Cambodia through Campu Lonpac Insurance Plc.

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