PETALING JAYA: LPI Capital Bhd, a general insurer 44%-owned by Public Bank Bhd, has met market expectations as it announces a “strong set of earnings” for the first nine months of financial year 2025 (9M25).
“LPI has impressed us by displaying extremely strong gross written portfolio growth primarily driven by its high profitability fire segment, despite weaker retail loan growth seen recently,” MBSB Research said in a note to clients.
It pointed out that there was a sharp increase in combined ratio, which was already guided for.
“Increased competition within the general insurance space and adverse weather conditions could put a damper on LPI’s fundamental outlook.”
In a separate note, Kenanga Research said LPI’s net profit of RM296mil in 9M25 made up 77% of consensus’ full-year forecast. Year-on-year, LPI’s 9M25 net earnings declined slightly by 2%.
In spite of higher insurance service revenue, mainly led by stronger demand for fire class insurance products, insurance service results declined by 8% from a lower average retention ratio of 68.9%.
“We opine this was led by revisions to key actuarial assumption where 9M24 predominantly saw reversals.
“Quarter-on-quarter, net profit for the third quarter of this year surged by 38% mainly from the sequential boost in dividend income of RM35.9mil during the quarter. Adjusting for dividends, earnings would have grown by 11% instead, which is in line with the 13% improvement in insurance service results,” stated Kenanga Research.
Meanwhile, CIMB Research said it has raised its net profit forecasts for the financial years of 2025 to 2027 by 5.6% to 11.7%.
This was done as the research house raised LPI’s top-line revenue forecasts by 2.5% to 5% for the fire insurance class.
It has also raised its target price for LPI to RM14.60 from RM14.37 previously.
“Our ‘hold’ call remains unchanged, supported by sustainable annual dividends (payout ratio: 85%) and the prospect of a special dividend amounting to RM2 per share from the mandatory sale of 212.1 million Public Bank shares.
“As we believe these developments have been priced in, we see limited share price catalysts in the near term,” said CIMB Research.
LPI is planning to sell its 1.13% stake in Public Bank, worth some RM923mil. The disposal mandate timeline has been extended to June 3, 2026 from Dec 4, 2025.
While the deadline to dispose of Public Bank shares had been extended by six months, Kenanga Research said its medium-term view for special dividend yields of about 11% remained undeterred as any distributions will likely be phased out.
Based on the intended distribution of about 70%, this equates to a potential special dividend payout of RM1.62 per share.
Looking ahead, Kenanga Research said that LPI is poised to see synergistic gains from more collaboration with Public Bank.
It also anticipated minimal impact from the eventual implementation of healthcare reforms given the group’s minor exposure of less than 10%.
“Maintain our ‘outperform’ rating and target price of RM16 per share.
“LPI’s premium valuation may also be supported by its long-term viability from its affiliation with Public Bank with the pending solidifying of synergies,” it added.
30.10.2025
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