AmInvestment Bank
LPI CAPITAL
(LPI MK EQUITY, LOND.KL)
FINANCIAL SERVICES
19 Aug 2025
LPI CAPITAL Combined Ratio Tracking Close to Expectation
Rationale for report: Company Result
HOLD
(Maintained)
Company report
Kelvin Ong, CFA
kelvin-ong@ambank.com.my
03-2036 2294
Key Data
| Price | RM14.74 |
| Fair Value | RM14.70 |
| 52-week High/Low | RM15.30/RM12.40 |
| Key Changes | |
| Fair value | ⇔ |
| EPS | ↔ |
Financial Summary (YE to Dec)
| FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|
| Insurance Revenue (RMmil) | 1,782 | 1,984 | 2,161 | 2,235 |
| Core net profit (RMmil) | 377 | 399 | 419 | 462 |
| FD Core EPS (Sen) | 95 | 100 | 105 | 116 |
| FD Core EPS growth (%) | 20.2 | 5.9 | 4.9 | 10.2 |
| Consensus net profit (RMmil) | 393 | 411 | 437 | |
| DPS (Sen) | 80 | 85 | 254 | 99 |
| BV/share (RM) | 6.1 | 6.2 | 4.7 | 4.9 |
| PE (x) | 15.6 | 14.7 | 14.0 | 12.7 |
| Div yield (%) | 5.4 | 5.8 | 17.3 | 6.7 |
| P/BV (X) | 2.4 | 2.4 | 3.1 | 3.0 |
| ROE (%) | 16.0 | 16.3 | 19.2 | 24.0 |
| Net Gearing (%) | nm | nm | nm | nm |
Stock and Financial Data
- Shares Outstanding (million): 398.4
- Market Cap (RMmil): 5,872.4
- Book Value (RM/share): 6.1
- P/BV (X): 2.4
- ROE (%): 16.0
- Net Gearing (%): –
Major Shareholders
- Public Bank (44.2%)
- Sompo Holdings (8.5%)
- Free Float: 47.3
- Avg Daily Value (RMmil): 0.7
Price performance
| 3mth | 6mth | 12mth | |
|---|---|---|---|
| Absolute (%) | (0.1) | 5.1 | 17.5 |
| Relative (%) | (1.0) | 5.1 | 20.4 |
Investment Highlights
- LPI posted weaker QoQ earnings in 2QFY25 due to higher motor and miscellaneous claims, along with increased commission and acquisition costs, which offset gains from insurance revenue and lower fire claims. Investment income also declined. 6MFY25 earnings were in line with expectations, with the combined ratio tracking estimates. The general insurance outlook remains challenging amid slow premium growth and persistent claims pressure. Trading at a FY26F P/BV of 3.1x and an expected ROE of 19.2%, factoring in a special dividend from the planned Public Bank share sale, the stock appears fairly valued. We maintain our HOLD rating.
- Recommendation and valuation. We maintain HOLD with an unchanged TP of RM14.70, targeting an FY26 P/BV of 3.1x and ROE of 19.2%. Our earnings estimates and neutral 3-star ESG rating are unchanged.
- 6MFY25 results were broadly in line with expectations, with the combined ratio tracking estimates. Net profit was stable at RM181 million (+1.0% YoY), representing 45.4% of our forecast and 46.0% of consensus. Lower insurance service results were offset by stronger investment income, mainly from higher net fair value gains. Operating revenue rose 8.9% YoY, driven by a 9.5% increase in insurance revenue, supported by growth in the fire, motor, and miscellaneous segments. GWP increased by 6.6% YoY. An interim dividend of 30 sen was declared, reflecting a 66% payout for 6MFY25-unchanged from the same period last year. On QoQ, net profit fell 15.1% to RM83 million in 2QFY25, impacted by higher insurance service expenses and weaker investment income.
- Combined ratio increased in 6MFY25. For the full 6MFY25 period, the NCI ratio rose by 260 basis points year-on-year to 44.8%, driven by higher claims in the fire and miscellaneous segments. Combined ratio for 6MFY25 higher at 76.4% compared to 73.5% in 6MFY24 due to increase in NCI ratio while management expense ratio climbed to 21.3% vs. 19.8% in the corresponding period of the preceding year.
- Fire and miscellaneous segments posted weaker insurance service results due to higher claims and increased expenses. In contrast, the motor segment showed strong improvement, recording RM28 million in 6MFY25 compared to RM7 million in 6MFY24. The marine, aviation, and transit (MAT) segment turned around, posting a positive insurance service result of RM4 million in 6MFY25 versus a loss of RM1 million in the same period last year.
Company profile
LPI Group, a leading Malaysian general insurer, boasts more than 60 years of experience while staying competitive in Singapore and strengthening in Cambodia.
LPI operates 21 Lonpac branches in Malaysia, one in Singapore, and an associated company in Cambodia via Campu Lonpac Insurance Plc. It ranks top 3 in fire, bond, medical & health, workers’ compensation, offshore oil-related, and engineering insurance, while placing 6th in gross direct premiums for motor & non-motor.
Investment thesis and catalysts
We maintain a HOLD on LPI Capital with an unchanged target price of RM14.70, based on FY26F valuation of 3.1x P/BV and 1% ROE, factoring in the impact of a special dividend from the Public Bank share sale. The stock appears fairly valued. However, the general insurance sector remains pressured by slow premium growth and elevated claims.
Valuation methodology
We value LPI Capital at a 3.1x P/BV using a Gordon growth model—with an 8.3% cost of equity, 0.6 beta, a 7.4% market risk premium, a 3.6% risk-free rate, and 3% long-term growth.
Risk factors
Potential risks to our projections include:
- Slower-than-anticipated economic expansion, which could hinder growth in Gross Written Premium (GWP).
- A surge in unforeseen claims, negatively affecting insurance service performance.
- Prolonged high interest rates in developed markets, leading to a reduced valuation of bond and securities portfolios, thereby impacting investment income.
EXHIBIT 1: VALUATIONS
| COE | 8.3% |
| Beta | 0.6 |
| Market risk premium | 7.4% |
| Risk free rate | 3.6% |
| Long term growth rate | 3% |
| P/BV | FY26 3.1x |
| FY26 BVPS | RM4.74 |
| TP | RM14.70 |
| ESG Premium | 0 |
| Adjusted TP | RM14.70 |
EXHIBIT 2: RESULTS SUMMARY
Income Statement (RMmil, Q1/Q2/6M)
| 1Q24 | 1Q25 | 2Q25 | % QoQ | % YoY | 6M24 | 6M25 | % YoY | |
|---|---|---|---|---|---|---|---|---|
| Operating revenue | 443 | 486 | 483 | -0.6% | 9.0% | 887 | 969 | 9.2% |
| Insurance revenue | 432 | 466 | 462 | -0.9% | 6.9% | 866 | 948 | 9.5% |
| Insurance service expenses | -190 | -204 | -229 | 12.3% | 20.5% | -392 | -433 | 10.6% |
| Insurance service result before reinsurance | 242 | 262 | 233 | -11.1% | -3.7% | 474 | 495 | 4.4% |
| Net expense/income from reinsurance contracts held | -33 | -44 | -55 | 25.0% | 66.7% | -66 | -99 | 50.0% |
| Insurance service result | 209 | 218 | 178 | -18.3% | -14.9% | 408 | 396 | -2.9% |
| Investment income | 37 | 38 | 31 | -18.4% | -16.2% | 74 | 69 | -6.8% |
| Realized gains and losses | 0 | 0 | 0 | 0.0% | 0.0% | 0 | 0 | 0.0% |
| Fair value gains and losses and other income | 0 | 0 | 0 | 0.0% | 0.0% | 0 | 0 | 0.0% |
| Other income | 0 | 0 | 0 | 0.0% | 0.0% | 0 | 0 | 0.0% |
| Total investment income | 37 | 38 | 31 | -18.4% | -16.2% | 74 | 69 | -6.8% |
| Net finance results | 24 | 24 | 20 | -16.7% | -16.7% | 48 | 44 | -8.3% |
| Other operating income | 1 | 1 | 1 | 0.0% | 0.0% | 2 | 2 | 0.0% |
| Other operating expenses | -3 | -4 | -4 | 0.0% | 33.3% | -6 | -8 | 33.3% |
| Finance costs | -1 | -1 | -1 | 0.0% | 0.0% | -2 | -2 | 0.0% |
| Share of profit after tax of equity accounted associate company | 0 | 0 | 0 | 0.0% | 0.0% | 0 | 0 | 0.0% |
| Profit before tax | 267 | 276 | 225 | -18.4% | -15.7% | 535 | 501 | -6.4% |
| Tax expense | -54 | -58 | -44 | -24.1% | -18.5% | -108 | -102 | -5.6% |
| Net profit | 213 | 218 | 181 | -16.9% | -14.9% | 427 | 375 | -12.2% |
| Core net profit | 213 | 218 | 181 | -16.9% | -14.9% | 427 | 375 | -12.2% |
RATIOS (Q1/Q2/6M)
| 1Q24 | 1Q25 | 2Q25 | % QoQ | % YoY | 6M24 | 6M25 | % YoY | |
|---|---|---|---|---|---|---|---|---|
| Net claims incurred ratio (%) | 44.3 | 45.7 | 43.9 | -4.0% | -0.9% | 42.2 | 44.8 | 6.2% |
| Net commission ratio (%) | 8.1 | 8.1 | 7.9 | -2.5% | -2.5% | 8.1 | 8.0 | -1.2% |
| Management expense ratio (%) | 18.4 | 21.2 | 21.5 | 1.4% | 16.8% | 19.8 | 21.3 | 7.6% |
| Net insurance finance cost ratio (%) | 3.5 | 3.5 | 3.3 | -5.7% | -5.7% | 3.5 | 3.4 | -2.9% |
| Net expense/income from reinsurance (%) | -0.5 | -0.6 | -0.6 | 0.0% | 20.0% | -0.5 | -0.6 | 20.0% |
| Combined ratio (%) | 73.8 | 77.6 | 75.2 | -3.1% | 1.9% | 73.5 | 76.4 | 3.9% |
Breakdown by segments
Fire
| 1Q24 | 1Q25 | 2Q25 | % QoQ | % YoY | 6M24 | 6M25 | % YoY | |
|---|---|---|---|---|---|---|---|---|
| Insurance revenue (RM mil) | 170 | 182 | 190 | 4.6% | 12.1% | 327 | 372 | 14.0% |
| Insurance service result (RM mil) | 62 | 40 | 55 | 36.8% | -10.4% | 126 | 96 | -23.8% |
| Net claims incurred (RM mil) | 67 | 80 | 78 | -2.5% | 16.4% | 120 | 158 | 31.7% |
| Losses on onerous contract (RM mil) | 0 | 0 | 0 | na | na | 0 | 0 | na |
| Net claims incurred ratio (%) | 39.4 | 43.9 | 41.6 | -5.2% | 5.6% | 36.8 | 42.5 | 15.5% |
Motor
| 1Q24 | 1Q25 | 2Q25 | % QoQ | % YoY | 6M24 | 6M25 | % YoY | |
|---|---|---|---|---|---|---|---|---|
| Insurance revenue (RM mil) | 109 | 115 | 119 | 3.6% | 9.2% | 214 | 234 | 9.3% |
| Insurance service result (RM mil) | 4 | 17 | 11 | -35.3% | 175.0% | 7 | 28 | 300.0% |
| Net claims incurred (RM mil) | -68 | -66 | -78 | 18.2% | 14.7% | -140 | -144 | 2.9% |
| Losses on onerous contract (RM mil) | 0 | 0 | 0 | na | na | 0 | 0 | na |
| Net claims incurred ratio (%) | 62.4 | 57.4 | 65.5 | 14.1% | 4.9% | 65.4 | 61.5 | -5.9% |
Marine, Aviation & Transit
| 1Q24 | 1Q25 | 2Q25 | % QoQ | % YoY | 6M24 | 6M25 | % YoY | |
|---|---|---|---|---|---|---|---|---|
| Insurance revenue (RM mil) | 26 | 29 | 23 | -20.7% | -11.5% | 54 | 52 | -3.7% |
| Insurance service result (RM mil) | -1 | 1 | 3 | 200.0% | 400.0% | -1 | 4 | -500.0% |
| Net claims incurred (RM mil) | -2 | 0 | 0 | na | na | -2 | 0 | -100.0% |
| Losses on onerous contract (RM mil) | 0 | 0 | 0 | na | na | 0 | 0 | na |
| Net claims incurred ratio (%) | -7.7 | 0.0 | 0.0 | na | na | -3.7 | 0.0 | -100.0% |
Miscellaneous
| 1Q24 | 1Q25 | 2Q25 | % QoQ | % YoY | 6M24 | 6M25 | % YoY | |
|---|---|---|---|---|---|---|---|---|
| Insurance revenue (RM mil) | 139 | 140 | 151 | 7.9% | 8.6% | 272 | 291 | 7.0% |
| Insurance service result (RM mil) | 19 | 18 | 20 | 11.1% | 5.3% | 45 | 38 | -15.6% |
| Net claims incurred (RM mil) | 55 | 60 | 56 | -6.7% | 1.8% | 115 | 116 | 0.9% |
| Losses on onerous contract (RM mil) | 1 | 1 | 1 | 0.0% | 0.0% | 1 | 1 | 0.0% |
| Net claims incurred ratio (%) | 39.6 | 42.9 | 37.1 | -13.5% | -6.3% | 42.3 | 39.9 | -5.7% |
Source: Company, AmInvestment Bank Bhd
EXHIBIT 3: ESG SCORE
| Environmental assessment | Parameters | Weightage | Rating | Rationale | |
|---|---|---|---|---|---|
| 1 | Allocation of investments in high risk ESG sectors | % of total investments allocated | 40% | * | 1% in high ESG risk sectors |
| 2 | Scope 1 GHG Emissions to insurance service results | t/Co2e/RM’Mil | 15% | * | 8.1% YoY decrease in 2024 |
| 3 | Scope 2 GHG Emissions to insurance service results | t/Co2e/RM’Mil | 15% | * | 2.6% YoY increase in 2024 |
| 4 | Scope 3 GHG Emissions to insurance service results | t/Co2e/RM’Mil | 15% | * | 5.3% YoY increase in 2024 |
| 5 | Electricity consumption to total income | MWh/RM’Mil | 10% | * | Stable at 1.6 in 2024 and 2023 |
| 6 | Water consumption to total income | m3/RM’Mil | 5% | * | Stable in 2024 |
| Weighted score for environmental assessment | 100% | * | |||
| Social assessment | Parameters | Weightage | Rating | Rationale | |
|---|---|---|---|---|---|
| 1 | Customer policy renewal ratio | % | 30% | * | Stable at 80% |
| 2 | Corporate Social Responsibility investments or spend | % of total insurance service results | 25% | * | RM172,000 invested in 2024 compared to 215,000 in 2023 |
| 3 | Claims settlement ratio | % | 20% | * | Each staff settled an average of 1,421 claims in 2024 vs. 1,441 in 2023 |
| 4 | Workforce diversity – women in senior management and above (excluding board directors) | % of total workforce | 15% | * | 39% in 2024 vs. 38% in 2023 |
| 5 | Average training hours per employee | hours | 10% | * | 33hrs in 2024 vs. 20hrs in 2023 |
| Weighted score for social assessment | 100% | * | |||
| Governance assessment | Parameters | Weightage | Rating | Rationale | |
|---|---|---|---|---|---|
| 1 | Board age diversity | % under the 61 to 70 years old category | 20% | * | All 5 board of directors at least 61-70 year old |
| 2 | Board women representation | % of total board directors | 15% | * | 43% representation |
| 3 | Directors with tenure of 3-6 years | % in the 3 to 6 years or more category | 15% | * | 100% |
| 4 | Independent board directors | % of total board directors | 20% | * | 60% independent directors |
| 5 | Remuneration to directors | % of insurance service expenses | 10% | * | |
| 6 | Cybersecurity, Privacy and Data Protection | Confirmed incidents | 20% | * | Zero in 2024, 2023 and 2022 |
| Weighted score for governance assessment | 100% | * | |||
| Environmental score | 40% |
| Social score | 25% |
| Governance score | 35% |
| Overall ESG Score | 100% |
Source: Company, AmInvestment Bank Bhd
EXHIBIT 4: FINANCIAL DATA
Income Statement (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Operating revenue | 1,905 | 1,927 | 2,111 | 2,293 | 2,395 |
| Insurance revenue | 1,782 | 1,782 | 1,984 | 2,161 | 2,235 |
| Insurance service expenses | -827 | -1,058 | -1,178 | -1,296 | -1,327 |
| Insurance service result before reinsurance | 955 | 724 | 806 | 864 | 908 |
| Net expense/income from reinsurance contracts held | -661 | -346 | -369 | -402 | -416 |
| Insurance service result | 294 | 378 | 437 | 462 | 492 |
| Investment income | 123 | 145 | 127 | 132 | 160 |
| Realized gains and losses | 0 | 0 | 0 | 0 | 0 |
| Fair value gains and losses and other income | 0 | 0 | 0 | 0 | 0 |
| Other income | 0 | 0 | 0 | 0 | 0 |
| Total investment income | 149 | 146 | 127 | 132 | 160 |
| Net finance results | 117 | 107 | 89 | 91 | 117 |
| Other operating income | 4 | 5 | 5 | 5 | 6 |
| Other operating expenses | -20 | -17 | -27 | -29 | -31 |
| Finance costs | -1 | -1 | -1 | -1 | -1 |
| Share of profit after tax of equity accounted associate company | 2 | 2 | 2 | 2 | 2 |
| Profit before tax | 395 | 474 | 505 | 530 | 584 |
| Tax expense | -81 | -97 | -106 | -111 | -123 |
| Net profit | 314 | 377 | 399 | 419 | 462 |
| Core net profit | 314 | 377 | 399 | 419 | 462 |
Balance Sheet (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Cash & deposits with FIs | 315 | 150 | 414 | 421 | 222 |
| Loans & receivables | 81 | 73 | 26 | 14 | 4 |
| Insurance receivables | 0 | 0 | 0 | 1 | 2 |
| Investment securities | 3,167 | 3,559 | 3,802 | 3,419 | 4,064 |
| Investment properties | 34 | 33 | 33 | 33 | 34 |
| Deferred acquisition cost | 0 | 0 | 0 | 1 | 2 |
| Fixed assets | 6 | 5 | 5 | 5 | 5 |
| Other assets | 966 | 963 | 803 | 899 | 873 |
| Total assets | 4,569 | 4,783 | 5,083 | 4,793 | 5,205 |
| Insurance contract liabilities | 2,200 | 2,257 | 2,530 | 2,835 | 3,178 |
| Insurance payables | 0 | 0 | 0 | 1 | 2 |
| Borrowings | 40 | 36 | 36 | 35 | 35 |
| Deferred tax liabilities | 25 | 38 | 9 | 9 | 9 |
| Other liabilities | 20 | 31 | 28 | 25 | 23 |
| Total liabilities | 2,286 | 2,363 | 2,601 | 2,905 | 3,246 |
| Share capital | 398 | 398 | 398 | 399 | 400 |
| Reserves | 1,885 | 2,024 | 2,084 | 1,489 | 1,559 |
| Shareholders’ funds | 2,283 | 2,422 | 2,482 | 1,888 | 1,959 |
Key Ratios (YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| ROE (%) | 14.0 | 16.0 | 16.3 | 19.2 | 24.0 |
| ROA (%) | 6.7 | 8.1 | 8.1 | 8.5 | 9.2 |
| Insurance service result (%) | 2.7 | 28.6 | 15.7 | 5.8 | 6.4 |
| Core net profit growth (%) | 24.4 | 20.2 | 5.9 | 4.9 | 10.2 |
| EPS growth (%) | 24.4 | 20.2 | 5.9 | 4.9 | 10.2 |
| Book value per share growth (%) | 3.4 | 6.1 | 2.5 | -23.9 | 3.7 |
Key Assumptions (YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Net claims incurred ratio | 45.0 | 40.4 | 44.9 | 44.2 | 40.5 |
| Management expense ratio | 20.7 | 19.6 | 19.9 | 20.0 | 21.9 |
| Net commission ratio | 8.4 | 8.2 | 7.7 | 7.8 | 8.5 |
| Net insurance finance cost ratio | 3.1 | 3.3 | 2.8 | 2.8 | 3.0 |
| Combined ratio | 77.2 | 71.5 | 75.2 | 74.8 | 73.9 |
| Yield from investment portfolio | 4.7 | 4.1 | 3.3 | 3.8 | 3.9 |
Source: Company, AmInvestment Bank Bhd estimates
DISCLOSURE AND DISCLAIMER
This report is prepared for information purposes only and it is issued by AmInvestment Bank Berhad (“AmInvestment”) without regard to your individual financial circumstances and objectives. Nothing in this report shall constitute an offer to sell, warranty, representation, recommendation, legal, accounting or tax advice, solicitation or expression of views to influence any one to buy or sell any real estate, securities, stocks, foreign exchange, futures or investment products. AmInvestment recommends that you evaluate a particular investment or strategy based on your individual circumstances and objectives and/or seek financial, legal or other advice on the appropriateness of the particular investment or strategy.
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