PETALING JAYA: LPI Capital Bhd may see its claims ratio easing as economic activities normalise.
However, reinsurance premiums may continue to increase as flooding becomes more frequent.
Kenanga Research said the repetitive flooding episodes may spur persistent revaluation of its reinsurance coverage.
The research house added that the insurer is likely to experience mounting pressures from the ongoing detariffication of the fire segment, which is expected to stimulate more competitive market pricing.“The motor insurance segment would follow suit in the second half of this year, albeit likely not as intense as the fire class due to its smaller proportion,” Kenanga Research said in a report.
Despite the challenges, the brokerage said it is “undeterred,” given LPI’s strong backing by a financial institution, or its sister company Public Bank Bhd.
Kenanga Research noted that LPI’s net profit of RM73.8mil for the first quarter ended March 31, 2023 (1Q23), post-Malaysian Financial Reporting Standards (MFRS) 17, had met the estimate, making up 22% and 24% of its and consensus full-year estimate based on MFRS 4 accounting standards respectively.
Kenanga Research pointed out that LPI’s restated 1Q22 results, based on MFRS 17, saw net profit higher by 5.5% and return of equity enhanced by 0.7 percentage points.
However, to reflect the new MFRS 17 requirements, the research firm has revised its earnings forecast down by 6% and 1% for FY23 and FY24 respectively.