KUALA LUMPUR: LPI Capital Bhd
's FY18 net earnings of RM314mil came in within expectations, according to Kenanga research.
The insurer declared an interim dividend of 42 sen, for a full-year payment of 68 sen, which beat the research house's expectation of a 60 sen dividend.
"Post-results, we trim our FY19E earnings by 4.2% on housekeeping adjustments as we incorporate FY18 full-year performance, particularly on our ratio assumptions," said Kenanga.
Kenanga maintained market perform on the counter with an unchanged target price of RM16.30.
On a year-on-year basis, FY18 revenue increased 3% as gross premium growth from the key fire and motor insurance segments was offset by a decline in marine, aviation and transit and miscellaneous insurance segments.
OPerating profit was flattish with the higher FY18 combined ratio, owing to higher claims incurred ration and net commission ratio.
Moving forward, the research house said it believes the group's trajectory could still be backed by Public Bank's mortgage growth rates, fuelled by its wide agency distribution network.
"However, concerns of maintaining a viable combined ratio (which we expect to hike up closer towards the c.70% levels) are looming ahead of the coming review of fire class insurances in 2019, likely leading to competition-driven margin compression.
"Though, the motor segment continues to demonstrate encouraging transaction volumes, indicating the strength of the group in this segment following its detariffication.
"On Miscellaneous items, the group looks towards deleveraging its exposure in construction and engineering works by venturing into other classes (i.e. medical, workmen compensation)."
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