HLG cool on insurers, but likes LPI Capital

HLG cool on insurers, but likes LPI Capital
Published: 2009/01/30

HLG Research is not too excited about the insurance sector, but it is telling investors to buy LPI Capital Bhd (8494) because the stock is a "sustainable yield play".

"LPI Capital continues to be well managed even during difficult times and is an attractive investment for yield-seekers and index outperformers," HLG wrote in a report.

The broker continues to like LPI due to its strong management, favourable insurance portfolio, income-protected investment assets, on-going capital management, further industry consolidation and index outperformance.

HLG has maintained a "buy" call on LPI shares with RM12.50 target price. The stock closed flat at RM10.30 yesteday.

LPI is expected to maintain its 8 per cent gross dividend yield, among the highest in Malaysia, from its relatively safe investments, HLG Research said.

"Its investment income is not expected to be significantly eroded by the 100 basis points cut in Overnight Policy Rates since November 2008," the report said.

LPI's management had also committed to sustaining over 100 per cent dividend payout ratio, the research said. The shares have outperformed the benchmark Kuala Lumpur Composite Index by 21 per cent over one year, HLG said.

HLG likes LPI's well-managed insurance portfolio with the strong risk and underwriting management.

"LPI has prudently trimmed exposure to the motor segment with only 60 per cent retention ratio for motor compared to 90 per cent for property insurance," the report said.

Property insurance continues to contribute the highest underwriting surplus due to the attractive pricing structure in Malaysia compares to the motor segment, it added.

LPI's investment returns will also stay resilient since 75 per cent of its investments is held in safe haven instrument that are shielded from the equity market, HLG said.

http://www.btimes.com.my/Current_News/BTIMES/articles/ciho/Article/