LPI Capital expected to lead in fire class insurance market
PETALING JAYA: Despite LPI Capital Bhd ’s subdued sentiment from the industry’s de-tariffication in the fire class insurance segment, Kenanga Research says the group has potential to remain a leading player in the market.

In a note, the research house also said LPI’s close affiliation with Public Bank Bhd will continue to boost the group’s prospects in particular because of the high demand for mortgages.

It is noteworthy that LPI is 42.7%-owned by Consolidated Teh Holdings Sdn Bhd, linked to late Tan Sri Teh Hong Piow, founder of Public Bank.

Kenanga Research said the general insurance provider, via its subsidiary, Lonpac Insurance Bhd, is likely to continue expanding its agency force and bancassurance network to gain more customers.

“Although the claims ratio might see a decline as overall activities normalise, reinsurance coverages could be reviewed as climate conditions worsen, raising risks tied to certain policies,” it noted.

For the first quarter of 2024, LPI beat expectations by registering a net profit which hit 30% of Kenanga Research’s full-year forecast and consensus full-year estimate.

“We find positive deviations in significantly better net claims, mainly attributed by the fire class segment from higher reversed claims reserves during the period,” Kenanga Research noted.

LPI’s year-on-year results were flattish, as its fire class insurance products were 19% weaker, but was supported by its motor and miscellaneous products that were higher at 11% and 12%, respectively.

All in, insurance service results surged by 44% as net incurred claims were significantly lower at 40.1% with claims provisions being reversed.

“We maintain an ‘outperform’ call on LPI with a higher target price of RM15 from RM14.70 as we roll over our valuation base year to the forecast financial year 2025 on an unchanged 2.6 times price-to-book-value-ratio,” it said.

This represents a 25% premium against the industry average of 2.1 times.
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Despite LPI Capital Bhd’s subdued sentiment from the industry’s de-tariffication in the fire class insurance segment, Kenanga Research says the group has potential to remain a leading player in the market.