AmInvest Research Reports

Author: AmInvest   |   Latest post: Tue, 7 Apr 2020, 9:10 AM


LPI Capital - Net claims remain elevated

Author:   |    Publish date:

Investment Highlights

  • We maintain our HOLD call on LPI Capital (LPI) with an unchanged FV of RM16.40/share supported by FY20 ROE of 15.4% leading to P/BV of 2.9x which is in line with its 5-year historical average PB. We see limited upside with the stock already trading at 2.7x PB. We make no changes to our earnings estimates.
  • LPI recorded a higher core net profit of RM88mil (+24.1% QoQ) in 3Q19 underpinned by an increase in net earned premium (NEP) and investment income.
  • 9M19 earnings of RM236mil improved marginally by 2.5% YoY supported by higher NEP and investment income partially offset by a rise in net claims. Cumulative net profit was within expectations, making up 73.1% of our and 70.7% of consensus estimates.
  • 9M19 gross written premium (GWP) slowed down to a growth of 3.6% YoY. Growth in GWP was driven largely by fire, motor as well as marine, and aviation and transit insurance. Lonpac is ranked 3rd in terms of GWP with a market share of 8.6% in the Malaysian general insurance industry. We understand that a substantial portion of Public Bank borrowers’ fire insurance has already converted to the group’s new innovative fire coverage with additional protection benefits at a slightly lower premium. Nevertheless, there remains some pressure on the pricing for fire insurance.
  • The group’s 9M19 NEP grew 10.2% YoY to RM746mil supported by higher retention ratios for fire and motor insurance.
  • Group underwriting (UW) margin for 9M19 deteriorated to 27.5% vs. 30.7% in 9M18 impacted by competitive pressure on premiums post-liberalization of the fire and motor insurance. UW margin was also affected by higher net claims and lower commission income from an increase in retention ratio to 66.8%.
  • Claims ratio in 9M19 rose to 45.2% vs. 41.6% in 9M18. Claims increased from the fire, marine, aviation & transit and miscellaneous (medical and accidental classes) segments. LPI plans to slow down the underwriting of policies for medical insurance to mitigate the risk of higher claims.
  • Management expense ratio improved to 20.5% while the commission ratio rose slightly to 6.7% for 9M19 attributed to lower reinsurance commissions.

Source: AmInvest Research - 16 Oct 2019

Share this
Labels: LPI

Related Stocks

Chart Stock Name Last Change Volume 
LPI 11.98 +0.14 (1.18%) 89,700 

  Be the first to like this.

I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Stock Screener using Technical and Fundamental criteria
MQ Affiliate
Join the MQ Affiliate Program today to earn rewards

654  231  427  609 

Top 10 Active Counters
 LAMBO 0.015+0.005 
 SAPNRG 0.11+0.005 
 HIBISCS 0.535+0.025 
 ARMADA 0.185+0.01 
 MINETEC 0.20+0.005 
 VELESTO 0.17+0.005 
 NETX 0.015+0.005 
 GAMUDA-WE 0.12+0.045 
 DBE 0.03+0.005 
 JAKS 1.01+0.125 


1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
2. MQ Affiliate – A smarter way to earn more rewards MQ Trader Affiliate Program
3. MQ Affiliate – How to become an effective affiliate MQ Trader Affiliate Program
4. MQ Affiliate – Upgrading to Affiliate Partner MQ Trader Affiliate Program
Partners & Brokers