Syarikat Takaful to see continued recovery in FY22

KUCHING: Syarikat Takaful Malaysia Keluarga Bhd (Syarikat Takaful) is expected to see continued recovery ahead with the resumption of face-to-face activities and recovery in banks’ loan growth, analysts observed.

In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) said: “Looking ahead, we believe the recovery in banks’ loan growth will continue to fuel growth in its credit-related products.

“The resumption of face-to-face activities should also drive sales of its other products, as seen in the fourth quarter of the financial year 2021 (4QFY21).”

It also pointed out that its continued digital efforts should allow Syarikat Takaful to reach under-served segments while simplifying its go-to-market strategy.

“We understand that, currently, management is in discussions with banks for additional bancassurance partnerships (on top of its existing 17 partnerships).

“Of its four key partners – Affin, RHB, BIMB and Bank Rakyat – Affin and Bank Rakyat’s agreements are due to expire in 2023, but Syarikat Takaful expects the partnerships to be extended, due to high switching costs,” the research team said.

On its 4QFY21 results, Kenanga Research said Syarikat Takaful’s FY21 beat estimates with its 4QFY21 core net profit (CNP) of RM157 million which brought its FY21 CNP to RM411 million.

“The deviation was due to higher-than-expected GEP from General Takaful, lower-than-expected Claims Ratio, and lower-than-expected effective tax rate, as Syarikat Takaful was required to provide for deferred tax benefits,” it said.

On a year-on-year (y-o-y) basis, Syarikat Takfaul’s gross earned premium (GEP) rose 10 per cent from its stronger family takaful (up seven per cent) and general takaful (up 16 per cent).

“However, a higher Combined Ratio weighed at 68.1 per cent (1.8ppt), and PBT rose by only three per cent.

“However, due to a provision for deferred tax benefits, effective tax fell by 8.8ppt to a mere six per cent, bringing CNP up by 14 per cent,” it said.

On a quarterly basis, Syarikat Takaful’s 4QFY21 GEP rose 25 per cent, driven by higher GEP in Family Fund (up 28 per cent) and General Fund (up 30 per cent).

“The spike in GEP is due to backlog of loans that couldn’t be approved in 3QFY21 due to FMCO, loans growth in 4QFY21 on the resumption of economic activity, and resumption of face-to-face activities, which boosted sales. Thanks to the aforementioned provision for deferred tax benefits, CNP jumped 115 per cent to RM157 million,” it said.

Post results, Kenanga Research said after revising itd FY22 ETR to account for the one-off prosperity tax, and tax on Wakalah income effective YA 2022, we lower our FY22E CNP by 10 per cent.

“We introduce FY23E CNP of RM363 million, implying a circa five per cent growth, fuelled by normalisation of tax rate (from the prosperity tax) and continued growth in GEP,” it said.

All in, it maintained an ‘outperform’ rating on the stock.

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