LPI Capital Berhad 2QFY25 Results Review: A Stable Quarter

Revised Target Price RM15.70 (from RM15.25)

LPI CAPITAL BHC, ID, FEMC 14.740-0.160 (-10)

Data points: 14.740, 14.230, 13.790, 13.250, 11.200, 12.530

▼ 6MFY25’s Combined ratio of 76.4% up +2.9%yoy. The higher figure was largely due to higher claims and management expenses ratio.

▲ 2QFY25’s Combined ratio of 75.2% down -2.4%qoq. This was due to a lower claims ratio and better contribution from onerous contracts line.

Forecasts unchanged. We make no changes to our earnings forecasts.

Key downside risks. (1) Weaker premium growth, (2) Higher reinsurance charges, (3) Higher insurance expenses.

Maintain BUY call: Revised GGM-TP of RM 15.70 (from RM15.25). The TP is based on a revised FY26F P/BV of 2.46x (formerly 2.45x, rolled on from FY25F), to reflect altered earnings prospects and ROE-based valuations.

(GGM assumptions: FY26F ROE of 16.5%, LTG of 4.0% & COE of 9.1%)

Source: Company, MBSBR

Description of bars (approximate values):

• t-1 (Initial): 98
• Insurance rev.: +17 (to 115)
• Insurance exp.: -122 (to -7)
• Reinsurance exp.: -18 (to -25)
• Inv. & finance result: +114 (to 89)
• Everything else: -5 (to 84)
• t (Final): 83

Source: Company, MBSBR

Description of bars (approximate values):

• t-1 (Initial): 78
• Insurance rev.: +39 (to 117)
• Insurance exp.: -24 (to 93)
• Reinsurance exp.: -16 (to 77)
• Inv. & finance result: +11 (to 88)
• Everything else: -5 (to 83)
• t (Final): 83

Source: Company, MBSBR

Description of bars (approximate values):

• t-1 (Initial): 179
• Insurance rev.: +82 (to 261)
• Insurance exp.: -90 (to 171)
• Reinsurance exp.: -3 (to 168)
• Inv. & finance result: +13 (to 181)
• Everything else: -1 (to 180)
• t (Final): 181

Source: Company, MBSBR

Insurance revenue: 443, 423, 462, 466, 483 (1Q FY24, 2Q FY24, 3Q FY24, 4Q FY24, 1Q FY25, 2Q FY25)

Insurance expense: -245, -322, -252, -239, -224, -346

Reinsurance expense: -33, -49, -90, -133, -163, -90

Investment & finance result: 42, 14, 42, 8, 44, 26

Everything else: -29, -25, -30, -24, -25, -30

Core NP: 101, 78, 171, 74, 98, 83

Source: Company, MBSBR

1. Total Overall: ▲ Mediocre

Insurance Service Result (RM m)

Bars: 158, 88, 88, 90, 79, 87 (t-5 to t)

Combined Ratio (%)

Bars: 79.2, 80.1, 68.4, 80.5, 83.1, 81.9 (t-5 to t)

GWP (RM m)

Bars: 552, 432, 465, 431, 569, 459 (t-5 to t)

Commentary: Overall, a mediocre quarter with solid sequential year GWP growth. The stable combined ratio comprises a particularly high claims ratio (stemming from the fire and motor segment), but the impact was offset by a lower-than-usual reinsurance ratio.

2. Fire Overall: ▲ Mediocre

Insurance Service Result (RM m)

Bars: 64, 62, 74, 71, 40, 56 (t-5 to t)

Combined Ratio (%)

Bars: 59.3, 63.3, 57.2, 61.7, 77.9, 70.7 (t-5 to t)

GWP (RM m)

Bars: 210, 179, 163, 183, 231, 182 (t-5 to t)

Commentary: A higher claims ratio resulted in a higher combined ratio, weighing down on the insurance service result.

3. Motor Overall: ▼ Weak

Insurance Service Result (RM m)

Bars: 19.3, 8.1, 12.1, 5.8, -0.9, 1.5 (t-5 to t)

Combined Ratio (%)

Bars: 100.8, 92.6, 89.4, 95.0, 83.1, 98.7 (t-5 to t)

GWP (RM m)

Bars: 120, 114, 102, 122, 122, 114 (t-5 to t)

Commentary: Unfortunately, a combination of high claims and reinsurance ratios resulted in a very weak insurance service result.

4. MAT Overall: ▲ Strong

Insurance Service Result (RM m)

Bars: -0.5, -0.9, 1.4, 0.8, 0.9, 2.6 (t-5 to t)

Combined Ratio (%)

Bars: 101.9, 103.5, 94.9, 97.0, 96.8, 88.6 (t-5 to t)

GWP (RM m)

Bars: 34, 30, 21, 21, 29, 29 (t-5 to t)

Commentary: A negative claims ratio provided some offset to a reinsurance ratio that was on the higher end.

5. Misc Overall: ▲ Mediocre

Insurance Service Result (RM m)

Bars: 26, 19, 24, 28, 18, 20 (t-5 to t)

Combined Ratio (%)

Bars: 80.7, 86.3, 82.7, 79.2, 87.0, 86.7 (t-5 to t)

GWP (RM m)

Bars: 174, 121, 162, 105, 187, 133 (t-5 to t)

Commentary: Lower reinsurance charges provided some offset to a high claim’s ratio.

Source: Company, MBSBR

GWP (RM mil) by segment for 1Q FY24, 2Q FY24, 3Q FY24, 4Q FY24, 1Q FY25, 2Q FY25.

• Fire: 210, 179, 183, 182, 231, 182
• Motor: 105, 114, 102, 122, 122, 114
• MAT: 34, 30, 21, 29, 29, 29
• Misc: 174, 121, 105, 133, 187, 158
• Total: 532, 432, 465, 431, 569, 459

Source: Company, MBSBR

Insurance Service Result (RM mil) by segment for 1Q FY24, 2Q FY24, 3Q FY24, 4Q FY24, 1Q FY25, 2Q FY25.

• Fire: 64, 62, 74, 71, 40, 56
• Motor: 8, 12, 6, 2, 19, 2
• MAT: 1, 1, 1, -1, 1, 3
• Misc: 26, 19, 24, 28, 18, 20
• Total: 88, 88, 90, 79, 79, 87

Source: Company, MBSBR

Insurance Revenue (RM mil) by segment for 1Q FY24, 2Q FY24, 3Q FY24, 4Q FY24, 1Q FY25, 2Q FY25.

• Fire: 157, 170, 172, 186, 182, 190
• Motor: 105, 109, 114, 117, 115, 119
• MAT: 29, 26, 27, 26, 29, 23
• Misc: 133, 139, 140, 134, 140, 151
• Total: 423, 443, 462, 466, 466, 483

Source: Company, MBSBR

Insurance & Reinsurance Expenses (RM mil) by segment for 1Q FY24, 2Q FY24, 3Q FY24, 4Q FY24, 1Q FY25, 2Q FY25.

• Fire: 93, 107, 99, 115, 142, 134
• Motor: 106, 101, 102, 111, 95, 117
• MAT: 29, 27, 26, 25, 28, 20
• Misc: 107, 120, 116, 106, 122, 131
• Total: 335, 355, 342, 372, 387, 395

Source: Company, MBSBR

Combined ratio (%) by segment for 1Q FY24, 2Q FY24, 3Q FY24, 4Q FY24, 1Q FY25, 2Q FY25.

• Fire: 59, 63, 62, 57, 78, 71
• Motor: 101, 93, 89, 95, 99, 83
• MAT: 102, 104, 95, 97, 97, 89
• Misc: 81, 86, 83, 79, 87, 87
• Total: 79, 80, 68, 81, 83, 82

Source: Company, MBSBR

Claims ratio (%) by segment for 1Q FY24, 2Q FY24, 3Q FY24, 4Q FY24, 1Q FY25, 2Q FY25.

• Fire: 37, 4, 12, 21, 24, -1
• Motor: 72, 64, 65, 57, 49, 65
• MAT: 21, -23, -16, -114
• Misc: 41, 43, 30, 37, 72, 33
• Total: 49, 29, 28, 24, 47, 24

Source: Company, MBSBR

Reinsurance ratio (%) by segment for 1Q FY24, 2Q FY24, 3Q FY24, 4Q FY24, 1Q FY25, 2Q FY25.

• Fire: 34, 30, 29, 35, 24, 6
• Motor: 4, 3, 12, 8, 8, 0
• MAT: 58, 102, 195, -31, -37, 85
• Misc: 31, 21, 16, 29, 23, -12
• Total: 21, 7, 18, 29, 35, 10

Source: Company, MBSBR

Expense ratio (%) by segment for 1Q FY24, 2Q FY24, 3Q FY24, 4Q FY24, 1Q FY25, 2Q FY25.

• Fire: 27, 21, 21, 22, 22, 23
• Motor: 25, 26, 25, 26, 26, 25
• MAT: 17, 19, 16, 18, 16, 20
• Misc: 26, 24, 24, 20, 26, 26
• Total: 25, 23, 21, 24, 24, 24

Source: Company, MBSBR

Source: Company, MBSBR

This report has been prepared by MBSB Investment Bank Berhad (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) 197501002077 (24878-X).

(Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad)

It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD). The directors, employees and representatives of MBSB INVESTMENT BANK BERHAD (formerly known as MIDF AMANAH INVESTMENT BANK BERHAD) may have an interest in any of the securities mentioned and may benefit from the information herein. Members of the MBSB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose.

STOCK RECOMMENDATIONS

BUY Total return is expected to be >10% over the next 12 months.

TRADING BUY The stock price is expected to rise by >10% within 3 months after a Trading Buy rating has been assigned due to positive news flow.

NEUTRAL Total return is expected to be between -10% and +10% over the next 12 months.

SELL Total return is expected to be <-10% over the next 12 months.

TRADING SELL The stock price is expected to fall by >10% within 3 months after a Trading Sell rating has been assigned due to negative news flow.

SECTOR RECOMMENDATIONS

POSITIVE The sector is expected to outperform the overall market over the next 12 months.

NEUTRAL The sector is to perform in line with the overall market over the next 12 months.

NEGATIVE The sector is expected to underperform the overall market over the next 12 months.

ESG RECOMMENDATIONS* – source Bursa Malaysia and FTSE Russell

★★★★ Top 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell

★★★ Top 26-50% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell

★★ Top 51%- 75% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell

★ Bottom 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell

* ESG Ratings of PLCs in FBM EMAS that have been assessed by FTSE Russell in accordance with FTSE Russell ESG Ratings Methodology