Kenanga Maintains Market Perform On LPI - Kenanga Research said LPI Capital Bhd's Q1 core net profit of RM72.5mil came in line with its and consensus expectations.
The group's 1Q18 revenue grew 10% on the back of higher gross earned premium in the general insurance segment. Growth in the fire insurance and miscellaneous insurance segments made up for the shortfall in the flat motor insurance segment.
On operating profit, earnings before interest and tax grew by a narrower 3% on higher combined ratio driven by higher claims incurred ratio (CIR) of 47.1%.
"Note that higher motor claims were observed during 1Q18 alongside the absence of “incurred but not reported” claims release from Malaysia Motor Insurance Pool, hence poorer claims experience.
"However, its CIR should normalise back to the low-40% level for the remaining
quarters."
THe research house said there was not much of revision to premiums following the commencement of Phase 2 of the framework on phased liberalisation of Motor and Fire Tariffs due to the risk-based capital framework and thin margins among motor insurers.
It added that the group has limited portfolio exposure to the stagnating motor insurance segment, which contributed 24% of its 1Q18 gross written premiums.
Kenanga Research maintained market perform on the counter with a higher rollover target price of RM16.30 fro RM15.10 previously.
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