We maintain HOLD on LPI Capital (LPI) with a higher FV of RM14.40/share (previously: RM12.80/share) after rolling forward our valuation to FY25F. We peg the stock to FY25F P/BV of 2.4x supported by ROE of 15.2%. No changes to our neutral 3-star ESG rating .
We make no adjustments to our earnings estimates as 6M24 core net profit was within expectations, making up 54.9% our full-year projection and 50% of consensus’.
LPI printed a lower net profit of RM78mil (-23% QoQ) in 2Q24, attributed to a drop in investment income.
6M24 earnings rose 30.1% YoY to RM179mil, contributed by higher insurance service and net financial results.
Operating revenue was subdued at RM939mil (+1.5% YoY) in 6M24.
Insurance revenue slipped marginally by 0.5% YoY in 6M24. This was due to the decline by 14.4% YoY in insurance revenue of the fire segment.
Gross written premium (GWP) grew 8.1% YoY to RM964mil in 6M24, in line with our expectation, supported by growth in premiums from the fire and motor classes of insurance.
6M24 insurance service results grew 42.1% YoY to RM176mil on the back of lower net expenses from reinsurance contracts. Net expenses from reinsurance contract for the fire segment were higher in 6M23 due to a reversal in recoveries of incurred claims from a write back in provisions for flood claims. Excluding this impact, growth of insurance service results in 6M24 would have been lower.
2Q24 saw an increase the overall net claims incurred (NCI) ratio to 44.3% vs. 40.1% in 1Q24, driven by the fire segment. For 6M24, the overall NCI ratio declined to 42.2% from 49.7% in 6M23 due to lower claims ratio for the fire and motor segments.
By segments, the insurance service results of fire segment rose by 35% YoY to RM126mil in 6M24, driven by lower net expenses from reinsurance contracts. Meanwhile, the insurance service results for motor segment improved to RM7mil in 6M24 vs. RM2mil in 6M23. For MAT, the segment recorded a lower insurance service results of -RM1mil in 6M24 (6M23: RM5mil) while that for the miscellaneous classes of business rose by 84.4% YoY.
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