Wednesday, December 1

Takaful Malaysia’s industry premium growth to outpace conventional insurance


KUCHING: Analysts are generally positive on the outlook for Syarikat Takaful Malaysia Bhd (Takaful Malaysia), with projections that the growth momentum of the group’s industry premium will outpace the conventional insurance while others believe that the group will be able to expand its foothold in the takaful market.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) continued to believe that the growth momentum of Takaful industry premium should outpace the conventional insurance given its low penetration as well as resilient demand for Takaful products.

“Meanwhile, to defend its turf as the fourth biggest market player in the combined life insurance and family takaful business, the group’s main focus remains on strengthening its foothold from the perspective of customer reach, operational agility, cost competitiveness as well as maximising value to shareholders.

“Note that the group has also been amplifying its presence through various marketing activities (including online initiatives) as well as promoting its unique proposition with 15 per cent noclaim rebate; with the latter to attract the right customers with good claim experience,” Kenanga Research said.

All in, Kenanga Research expected Takaful Malaysia to register two-year net profit (NP) compound annual growth rate (CAGR) of nine per cent, driven by decent gross earned contributions (GEC) growth (two-year CAGR of 13 per cent) alongside stable claims incurred ratio of 52 per cent-53 per cent for financial year 2018-2019 estimate (FY18E-FY19E), respectively.

The research arm also continued to expect decent delivery of return on equity (ROE) (of 25 per cent) in FY18, being the highest in the industry (vis-a-vis average insurance and finance industry’s low teens of 10-11 per cent) with decent earnings in place.

As for the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), it believed that Takaful Malaysia will be able to expand its foothold in the takaful market, supported by the group’s long-term strategic focus in the new digital market.

“While we believe traditional distribution channels such as banca and agency will remain important, we foresee its new digital online channel will be able to capture wider market share,” MIDF Research said.

With more products expected to be rolled out via the digital platform, the research arm was positive that it will be a key earnings driver.

“According to management, the traction for these new products has been encouraging given its convenience and seamless purchasing process.

“Additionally, more initiatives are planned including innovation in online underwriting.”

The research arm added that this will enable the company to achieve better performance metrics including high straight through processing rates and quick turnaround time.