KUALA LUMPUR: LPI Capital Bhd's third quarter (Q3) of 2022 results came within Affin Hwang Capital's expectations.

Affin Hwang said LPI Capital's Q3 2022 net profit recovered by 31.7 per cent quarter-on-quarter (qoq) to RM74.7 million.

LPI Capital's net profit had fallen 29 per cent on a year-on-year (yoy) basis against Q3 2022 as the results were dampened by a sharp rise in overall Q3 2022 claims, the firm said.

"As a result, LPI Capital's nine months of 2022 (9M22) net claims ratio saw a significant increase to 45.4 per cent versus 36.1 per cent in 9M21.

"Its 9M22 underwriting profits declined by 31.7 per cent yoy, due to a substantial pullback in motor and miscellaneous segments underwriting profits against 9M21. Hence, 9M22 net profit remained challenging, down 29 per cent yoy to RM193 million," Affin Hwang said.

Affin Hwang maintained its 2022/2023/2024 earnings forecasts on LPI Capital with a lower target price.

"We downgrade our rating on LPI to a Sell from Hold, with our target price cut to RM11.00 from RM12.62, as we factor in an additional risk premium of 0.5 per cent to our cost of equity of 8 per cent.

"LPI Capital's solid industry track record and robust capital adequacy ratio (CAR) in excess of 400 per cent reflects its strong underwriting capacity, though it continues to face headwinds in premium growth and claims," it added.