KUALA LUMPUR (July 9): LPI Capital Bhd (KL:LPI) is expected to return about RM737 million to shareholders as special dividends after completing the sale of its 1.13% stake in Public Bank Bhd (KL:PBBANK), according to BIMB Securities Research.
The research house said the insurer had completed the disposal of 220.3 million Public Bank shares for RM1.05 billion in May, with about 70% of the proceeds to be distributed progressively over 18 months.
A portion is expected to be paid towards the end of the financial year ending Dec 31, 2026 (FY2026), with the remainder in FY2027.
LPI sold the shares at RM4.75 apiece to local and foreign institutional investors. BIMB said the disposal also addressed regulatory requirements, as LPI, being a subsidiary of Public Bank, is not allowed to hold shares in the bank.
The remaining RM308 million or nearly 30% of the proceeds, has been earmarked for reinvestment into securities to generate investment income and offset the loss of future dividend income from the Public Bank stake.
Of this, about RM100 million has been deployed into two listed banking stocks, while the remaining RM208 million has been placed in fixed deposits pending suitable opportunities to invest in blue-chip dividend-paying stocks.
BIMB said the temporary placement of funds in lower-yielding fixed deposits could result in softer investment income in the second half of FY2026.
“Lower returns from fixed deposits, which yield slightly above 3%, compared with the higher dividend yields available from blue-chip equities, are expected to weigh on investment income during the period,” it said.
Still, BIMB expects LPI to deliver decent second-quarter earnings, likely to be announced in mid-August, supported by improved premium growth.
The research house said gross written premium growth is expected to improve from the softer 1.8% year-on-year growth recorded in the first quarter, helped by stronger cross-selling through Public Bank’s small and medium enterprise customer network.
Demand for personal accident products and cross-selling opportunities among existing residential property insurance customers are also expected to support premium growth.
However, fire claims are expected to rise quarter-on-quarter in the second quarter due to flood-related losses, although BIMB said the impact is not expected to be severe. Motor claims are also expected to remain elevated for the rest of FY2026, mainly due to higher court-awarded compensation for bodily injury claims.
BIMB trimmed its FY2026 earnings forecast for LPI by 1.3% to reflect lower expected investment income in the second half.
It also lowered its fair value for the stock to RM14.50 from RM14.75, based on a lower FY2027 price-to-book value of 3.2 times. BIMB does not have a rating on LPI.
For FY2026, BIMB expects LPI’s core net profit to rise 2.7% to RM379 million, from RM369 million in FY2025. Core net profit is projected to grow further to RM415 million in FY2027 and RM451 million in FY2028.
BIMB forecast LPI’s dividend per share at RM2.23 for FY2026, lifted by the special dividend payout, before easing to RM1.37 in FY2027 and 98 sen in FY2028.
The research house also said LPI is still assessing whether to participate in the sale of value-based medical and health insurance or takaful products, as medical insurance currently makes up only 6% to 7% of its overall portfolio.
LPI is also preparing for Phase 2B of the fire and motor insurance de-tariffication framework, which could allow greater pricing flexibility by 2027. However, BIMB said the transition is likely to keep pricing competition intense across the fire and motor segments.