Potential special dividend buoys LPI’s outlook

PETALING JAYA: LPI Capital Bhd is expected to feel a pinch on its near-term earnings as reinsurance costs increase, analysts say.

The insurer last week posted a lower net profit of RM97.98mil, or basic earnings per share of 24.59 sen, for the first quarter ended March 31, 2025 (1Q25), mainly due to a sharp rise in net reinsurance expenses, which offset gains from higher insurance revenue and lower insurance service expenses. Revenue came in at RM515.1mil.

CIMB Securities said continued pressure from rising reinsurance costs and the risk of higher claims could weigh on LPI’s earnings outlook.

“Additionally, we remain cautious on premium growth prospects amid heightened uncertainty in the domestic economic outlook, driven by spillover effects from global trade tensions,” it added.

The research house downgraded its call on LPI from “buy” to “hold”, with a lower target price (TP) of RM14.37 per share.

Meanwhile, MIDF Research, while maintaining the insurer’s earnings forecast, noted that reinsurance costs, higher-than-expected claims and weak premium growth remain key downside risks.

Despite the challenges, the research house has revised its valuation of the stock upwards, factoring in synergies from LPI’s closer relationship with Public Bank Bhd, which acquired a 44.15% stake in the insurer last October.

LPI is set to divest its 1.13% stake in the bank, with the transaction scheduled for completion by year-end. MIDF Research said the Public Bank stake divestment could lead to a special dividend payout.

As such, it has maintained a “buy” call on LPI with a TP of RM15.25.

Sharing the same view, Kenanga Research – which has an “outperform” call on LPI with a TP of RM16 – said the company’s long-term value may be enhanced by the deepening affiliation with Public Bank.

“We opine the disposal of LPI’s shares in Public Bank would be from September 2025 onwards, after receiving Public Bank’s first interim dividend for financial year 2025, yet still ahead of the December 2025 disposal deadline,” it stated.

Separately, Affin Hwang Investment Bank expects LPI’s claims and combined ratios to normalise in the upcoming quarters.

Thus, the research house has maintained a “hold” rating on the stock with a TP of RM14.20.