PETALING JAYA: Analysts remain optimistic on insurer LPI Capital Bhd
’s growth prospects, but warn that the ongoing global tensions may lead to weaker growth and higher claims costs.
MBSB Research said in a report to clients that key downside risks for the group include weaker-than-expected premium growth, adverse weather conditions, and heightened geopolitical tensions.
Logistics costs leading to reinsurance and claim ratio spikes, as well as elevated competition, also remain concerns.
Kenanga Research said LPI Capital’s first quarter ended March 31, 2026 (1Q26) net profit growth of 2% met expectations, adding that long-term prospects could hinge on the gradual formation of synergies with Public Bank Bhd.
That said, near-term earnings could see challenges from a volatile investment landscape and risks of higher reinsurance premiums, it noted while maintaining its “outperform” call on the stock.
Kenanga Research opined that LPI Capital’s fire and real estate insurance segments may face elevated claims risk arising from the increasing frequency and severity of climate-related events and exposures, which could in turn lead to higher reinsurance premiums.
This may prompt the group to adopt a more selective approach towards risk underwriting and pricing in the near term, potentially moderating growth for the segment.
Notably, this remains LPI Capital’s core business, contributing circa 70% of its insurance service results, it added.
“Still, this could be offset by the group benefitting from the expansion of its distribution capabilities through a wider agency network and branch footprint following its acquisition by Public Bank in December 2024, which should accelerate customer outreach across key markets.
“The broader distribution platform could help offset potential gaps in investment income arising from the pending disposal of LPI Capital’s 1.13% stake in Public Bank’s shares, with approximately 30% of the proceeds earmarked for redeployment into new investment opportunities,” the research house said.
An analyst told StarBiz that although he is still positive on LPI Capital, elevated claims – given the volatile external environment – are certainly a key risk factor to look out for, moving forward.
LPI Capital’s net profit for 1Q26 increased to RM99.53mil, up from RM97.97mil recorded in the same quarter last year.
The company said this was due to the increase in profit recorded by its investment holding segment, contributed by higher tax-exempt dividend income received from its equity investment during the quarter under review.
Moreover, its revenue was up to RM547.7mil from RM515.1mil in 1Q25, largely contributed by profits from its general insurance segment which went up to RM521.5mil from RM490.9mil in 1Q25, buoyed by higher insurance revenue.
The investment holding segment recorded a higher revenue of RM26.2mil against RM24.2mil in 1Q25, contributed by higher dividend income received, it added.
Kenanga Research said its target price of RM16 for LPI Capital is based on an unchanged 2.6 times financial year 2026 price to book value.
“This represents a 25% premium against the industry average of 2.1 times, which we believe is fair, given its better net margins of 18% to 20% (versus peers’ 11%), and higher dividend returns of 5% to 6% (versus peers’ 4% to 5%).
“LPI Capital’s premium valuation may also be supported by its long-term viability from its affiliation with Public Bank with the pending solidifying of synergies.”
At last look, the stock was at RM14.38 apiece.
