LPI shining bright on lucrative fire segment

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

https://www.thestar.com.my/business/business-news/2025/10/30/lpi-shining-bright-on-lucrative-fire-segment

LPI Capital Bhd:

 

LPI Capital Bhd - Investor Summary

Public Liability & General Insurance, Malaysia

🟢 THE INVESTMENT THESIS: "The Fortress Dividend Stock"

LPI is a high-quality, conservatively managed Malaysian general insurer that combines exceptional profitability with a rock-solid balance sheet, delivering reliable dividends to shareholders. Think of it as a defensive fortress that consistently generates strong returns through underwriting discipline and prudent capital management.

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📊 BUSINESS MODEL IN 30 SECONDS

LPI sells insurance policies (collects premiums), invests those premiums while holding reserves for future claims, and profits from the difference between:

1. Underwriting Profit = (Premiums Earned) - (Claims Paid + Operating Expenses)

2. Investment Income = Returns on the large investment portfolio

Key Insight: LPI makes money even before investments through superior underwriting discipline.

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🎯 KEY INVESTMENT ATTRACTIONS

1. Exceptional Profitability (The "Wow" Factor)

• Net Profit Margin: 19.5% (2024) - Extremely high for insurance

• Return on Equity (ROE): 16.0% (2024) - Beats most peers

• Earnings Growth: Net income grew from MYR 337M (2020) to MYR 377M (2024) despite revenue volatility

2. Fortress Balance Sheet (Sleep-Well-At-Night Safety)

• Minimal Debt: Debt is only 0.75% of assets (virtually debt-free)

• High Capitalization: Equity represents 51% of total assets (very strong buffer)

• Conservative Reserves: Large technical reserves indicate prudent claims management

3. Reliable Dividend Payer

• Consistent Payouts: Regular dividends for years

• High Yield: Dividend payout ratio of ~74% of earnings

• Sustainable: Covered by strong underlying cash generation

4. Quality Management

• Demonstrated underwriting discipline (generally low loss ratios)

• Cost control expertise (dramatically reduced expenses in 2024)

• Conservative investment approach (large, diversified portfolio)

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⚠️ KEY RISKS TO UNDERSTAND

1. Inherent Insurance Volatility

• Claims can spike (as seen in 2022 when claims jumped 241%)

• Revenue growth can be inconsistent (varies year to year)

• Cash flow swings dramatically due to insurance reserve timing

2. Industry & Economic Sensitivity

• Competitive market in Malaysian general insurance

• Investment returns depend on market conditions

• Economic cycles affect both premium growth and claim frequency

3. High Expectations Already Priced In?

• Premium valuation likely reflects the quality

• Limited "surprise upside" given conservative approach

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📈 FINANCIAL HEALTH REPORT CARD

Metric	Performance	Grade
Profitability	19.5% Net Margin, 16% ROE	A+
Balance Sheet Strength	51% Equity/Assets, Near Zero Debt	A+
Cash Flow Stability	Volatile but Strong Underlying FFO	B
Dividend Reliability	Consistent, ~74% Payout Ratio	A
Growth Consistency	Inconsistent Top-line, Steady Bottom-line	B
Overall Financial Health	Exceptional	A

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🎭 WHAT TYPE OF INVESTOR IS THIS FOR?

✅ YOU'LL LIKE LPI IF YOU:

• Seek reliable dividend income with growth potential

• Value capital preservation and low-risk businesses

• Understand and accept cyclical industry volatility

• Prefer conservatively managed companies with strong moats

• Want defensive exposure to the Malaysian financial sector

❌ YOU MAY PREFER OTHER OPTIONS IF YOU:

• Seek high growth or aggressive expansion stories

• Cannot tolerate earnings and cash flow volatility

• Prefer high leverage/aggressive capital structures

• Want tech disruption or revolutionary business models

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🔮 FUTURE OUTLOOK & CATALYSTS

Positive Catalysts:

1. Continued underwriting discipline maintaining low loss ratios

2. Investment income growth in rising interest rate environments

3. Market share gains from conservative competitors during hard markets

4. Potential special dividends if excess capital builds up

Monitoring Points (What to Watch):

1. Loss Ratio trend (rising would be negative)

2. Premium growth (consistency indicates market strength)

3. Investment portfolio performance (major earnings component)

4. Dividend coverage ratio (FFO to dividends)

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💡 THE BOTTOM LINE

LPI is a "quality compounder" - a financially bulletproof company that consistently earns high returns on equity and pays out most earnings as dividends.

Think of it as: The "Warren Buffett-style" insurance stock of Malaysia - boring but brilliant, conservative but profitable, predictable but rewarding.

Current 2025 quarterly data suggests the positive trend continues: Strong revenue recovery, maintained high margins, and robust bottom-line growth.

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🎯 ONE-SENTENCE SUMMARY

*"LPI offers investors a rare combination of Malaysian insurance exposure: exceptional profitability (19.5% margins), fortress-like financial strength (51% equity/assets), and reliable dividends, with the main trade-off being acceptance of normal insurance industry volatility."*

Investment Suitability: Core holding for dividend-focused, risk-averse investors seeking quality Malaysian financial exposure.

LPI Capital’s 1Q net profit surges 37%

LPI Capital’s 1Q net profit surges 37%, shares snap losing streak after results

By Hee En Qi / theedgemalaysia.com

29 Apr 2024, 01:34 pm

KUALA LUMPUR (April 29): Shares in LPI Capital Bhd snapped a three-day losing streak on Monday, after the general insurer reported a 37% net profit surge in the first quarter, thanks largely to sharply lower net expenses from reinsurance contracts held and higher investment income.

LPI had turned positive following the results announcement, and rose nearly 3% to as high as RM12.12. The stock closed at RM11.92 at 5pm, valuing the company founded by the late Tan Sri Dr Teh Hong Piow of Public Bank Bhd at RM4.75 billion. Trading volume stood at 251,900 shares at the closing bell. 

Net profit for the three months ended March 31, 2024 (1QFY2024) was RM101.29 million compared to RM73.83 million over the same period last year, LPI said in an exchange filing. Revenue for the quarter edged up 1.4% year-on-year to RM469.8 million from RM463.3 million as gross written premiums rose.

“The Malaysian insurance industry will continue to face greater competition and underwriting margins compression owing to the phased liberalisation process,” LPI said. The company said it will focus on “strategic sectors that can provide steady and sustainable profits”.

For 1QFY2024, the company’s general insurance segment — which mainly provides motor and fire insurance — reported a 30% year-on-year increase in its profit before tax to RM107.45 million from RM82.4 million, on a lower net claims incurred ratio of 40.1% in 1QFY2024, from 51.8% a year earlier.

Meanwhile, the pre-tax profit of the investment holding segment more than doubled to RM19.9 million from RM9 million, contributed by higher tax-exempt dividend income received from its equity investment.

The company “will continue to strengthen its distribution channels by forming partnerships and enhancing its collaboration with agents and bancassurance partners, to grow the desired portfolios”, LPI added.

Shares of LPI closed at RM11.92 on Monday, up 12 sen from last Friday’s close. The stock have dipped two sen or 0.17% this year, amid caution among analysts.

There are three “hold” calls out of five research houses covering the stock and two “buy” ratings. The consensus 12-month target price is RM13.13.

https://theedgemalaysia.com/node/709704

LPI at a glance

 

LPI at a glance

LPI

LPI

Its revenues grew consistently and at a rate of between 5% to 10% yearly..  However, profit before tax declined since 2016 due to shrinking profit before tax margin.  The profit before tax margin declined from a high of 37.6% in 2016 to 22.5% in 2022.   This is due to liberalization of the insurance sector and the increasing competition in the market place.

Its share price has declined at the same pace as the decline in its profit before tax and its EPS, resulting in a flattish PER. 

LPI 24.8.2017

LPI		24.8.2017
5 Years Quarterly Report History
Qtr	Financial	Revenue	PBT	PAT	PBT
No	Quarter	(RM,000)	(RM,000)	(RM,000)	Margin
2	30-Jun-17	352,710	89,216	68,064	25.3%
1	31-Mar-17	347,640	88,794	70,563	25.5%
4	31-Dec-16	355,552	106,866	81,450	30.1%
3	30-Sep-16	363,529	97,404	77,768	26.8%
2	30-Jun-16	339,250	232,474	212,619	68.5%
1	31-Mar-16	320,561	82,181	65,386	25.6%
4	31-Dec-15	338,623	125,616	102,211	37.1%
3	30-Sep-15	349,507	94,875	75,842	27.1%
2	30-Jun-15	304,726	101,829	85,739	33.4%
1	31-Mar-15	291,730	70,746	57,197	24.3%
4	31-Dec-14	299,168	133,299	117,059	44.6%
3	30-Sep-14	301,236	77,425	64,195	25.7%
2	30-Jun-14	291,491	68,551	51,181	23.5%
1	31-Mar-14	277,798	62,674	50,581	22.6%
4	31-Dec-13	294,649	71,309	52,392	24.2%
3	30-Sep-13	283,508	71,894	60,357	25.4%
2	30-Jun-13	282,398	62,507	46,579	22.1%
1	31-Mar-13	258,467	51,091	42,112	19.8%
4	31-Dec-12	271,929	62,622	47,385	23.0%
3	30-Sep-12	256,307	59,062	47,632	23.0%
5 Years Trailing 4 Quarters
No.	Financial	ttm-Rev	ttm-PBT	ttm-PAT	ttm-PBT
Qtr.	Quarter	(RM,000)	(RM,000)	(RM,000)	Margin
2	31-Dec-17	1,419,431	382,280	297,845	26.9%
1	31-Dec-17	1,405,971	525,538	442,400	37.4%
4	31-Dec-16	1,378,892	518,925	437,223	37.6%
3	31-Dec-16	1,361,963	537,675	457,984	39.5%
2	31-Dec-16	1,347,941	535,146	456,058	39.7%
1	31-Dec-16	1,313,417	404,501	329,178	30.8%
4	31-Dec-15	1,284,586	393,066	320,989	30.6%
3	31-Dec-15	1,245,131	400,749	335,837	32.2%
2	31-Dec-15	1,196,860	383,299	324,190	32.0%
1	31-Dec-15	1,183,625	350,021	289,632	29.6%
4	31-Dec-14	1,169,693	341,949	283,016	29.2%
3	31-Dec-14	1,165,174	279,959	218,349	24.0%
2	31-Dec-14	1,147,446	274,428	214,511	23.9%
1	31-Dec-14	1,138,353	268,384	209,909	23.6%
4	31-Dec-13	1,119,022	256,801	201,440	22.9%
3	31-Dec-13	1,096,302	248,114	196,433	22.6%
2	31-Dec-13	1,069,101	235,282	183,708	22.0%
1	31-Dec-13	1,051,732	227,306	177,560	21.6%
4	31-Dec-12	1,039,326	214,036	166,925	20.6%
3	31-Dec-12	1,006,720	203,413	158,874	20.2%
5 Years Adjusted EPS, DPS, NTA and ttm-EPS for capital changes
No of shares (m)		331.9
		adj	adj	adj	adj	adj
Qtr	Financial	EPS	DPS	NTA	ttm-EPS	ttm-DPS
No	Quarter	(Cent)	(Cent)	(RM)	(Cent)	(Cent)
2	30-Jun-17	20.51	27.0	5.48	89.75	82.03
1	31-Mar-17	21.26	0.0	5.23	133.31	80.04
4	31-Dec-16	24.54	55.0	5.54	131.75	80.04
3	30-Sep-16	23.43	0.0	5.29	138.01	75.03
2	30-Jun-16	64.07	25.0	5.25	137.43	75.03
1	31-Mar-16	19.70	0.0	4.96	99.19	70.03
4	31-Dec-15	30.80	50.0	5.24	96.72	70.03
3	30-Sep-15	22.85	0.0	4.87	101.20	56.62
2	30-Jun-15	25.84	20.0	5.02	97.69	56.62
1	31-Mar-15	17.24	0.0	4.89	87.28	49.88
4	31-Dec-14	35.27	36.6	4.97	85.28	49.88
3	30-Sep-14	19.34	0.0	4.85	65.80	47.79
2	30-Jun-14	15.42	13.3	4.82	64.64	47.79
1	31-Mar-14	15.24	0.0	4.60	63.25	46.46
4	31-Dec-13	15.79	34.5	4.84	60.70	46.46
3	30-Sep-13	18.19	0.0	4.39	59.19	45.14
2	30-Jun-13	14.04	12.0	4.20	55.36	45.14
1	31-Mar-13	12.69	0.0	3.93	53.50	43.15
4	31-Dec-12	14.28	33.2	4.14	50.30	43.15
3	30-Sep-12	14.35	0.0	3.66	47.87	43.16
Capital changes
No.	Financial	No of
Qtr.	Quarter	Shrs (m)
2	30-Jun-17	331.9
1	31-Mar-17	332.1
4	31-Dec-16	332.0
3	30-Sep-16	331.9
2	30-Jun-16	332.0
1	31-Mar-16	331.9
4	31-Dec-15	332.0
3	30-Sep-15	331.9
2	30-Jun-15	332.1
1	31-Mar-15	332.0
4	31-Dec-14	220.9
3	30-Sep-14	220.3
2	30-Jun-14	220.3
1	31-Mar-14	220.3
4	31-Dec-13	220.2
3	30-Sep-13	220.3
2	30-Jun-13	220.3
1	31-Mar-13	220.4
4	31-Dec-12	220.3
3	30-Sep-12	220.3
2	30-Jun-12	220.3
1	31-Mar-12	220.3
4	31-Dec-11	220.4
3	30-Sep-11	220.3