Syarikat Takaful Malaysia Soars

Syarikat Takaful Malaysia Bhd gets an “outperform” rating and RM4.27 target price from Kenanga Investment Bank Bhd as the latter initiated coverage on the stock.

Kenanga IB said growing demand for takaful products, low penetration rates as well as government initiatives augur well for Syarikat Takaful’s earnings prospect.

Syarikat Takaful’s total fund assets size have grown with a higher quantum of five-year compound annual growth rate (CAGR) of 10 per cent to RM26.8 billion in 2016 compared to the conventional insurance’s total fund assets growth of seven per cent.

Its net contribution income has also grown faster at five-year CAGR of nine per cent vis-a-vis conventional five-year CAGR of six per cent.

“Coupled with low penetration rate of 54 per cent as well as growing consumer awareness amid rising medical costs and living expenses, we still see tremendous potential in the takaful business which will continue to support Syarikat Takaful earnings,” Kenanga IB said.

The firm said Syarikat Takaful is also well poised to benefit from government’s initiatives under the Economic Transformation Programme (ETP).

The government has initiated a few important initiatives such as Life Insurance and Family Takaful Framework as well as phased liberalisation of general insurance to improve intake of insurance and takaful products and services with the aim to achieve 75 per cent penetration rate by 2020 under ETP.

“Given the group’s biggest market share in industry’s group Family Takaful business (at 25 per cent as of financial year 2016), and having the fourth biggest market share in the combined Life insurance and Family Takaful business, we believe the group is well poised to benefit from such initiatives,” it said.

It said this support its estimated two-year GEP CAGR of 14 per cent.

Syarikat Takaful’s unique proposition with 15 per cent no-claim rebate will continue to attract the right customers with good claim experience as well as a stabiliser in driving low claims experience – which have seen its net earned premium growing at a five-year CAGR of nine per cent.

“In terms of claims experience, the group’s ratio is well maintained at 53 per cent to 58 per cent from financial year 2011 to 2016, vis-à-vis other conventional insurers which are hovering at 40 per cent to 63 per cent, thanks to its unique proposition as well as well-balanced classes of business,” it said.