Stronger loan appetite to spur Syarikat Takaful sales

PETALING JAYA: The pick-up in economic activities is good for Syarikat Takaful Malaysia Bhd (STMB) as the stronger loan appetite is likely to spur sales of its credit-related products.

The group will continue to leverage its bancatakaful partners to push sales of high-margin mortgage insurance and personal financing insurance products under the family takaful umbrella.

“Growth in mortgage insurance will also benefit fire insurance sales, which in turn will positively affect the general segment,” said RHB Research.

The research firm said for the financial year 2023 (FY23), STMB retained its guidance for high single-digit gross earned contributions growth.

It understands that the strong bottom-line performance in the third quarter of 2022 (3Q22) implies a better-than-initially anticipated contractual service margin balance estimate under MFRS 17.

This, in turn, presents a downside risk to management’s 15% to 20% full-year (downward) earnings adjustment guidance following adoption on Jan 1, 2023, it added.

STMB reported a 3Q22 net profit of RM87.3mil, bringing the first nine months’ earnings to RM243.7mil.

HLIB Research said cumulatively from July to September 2022, lending applications climbed 53% year-on-year (y-o-y), while system loans increased 6.4% y-o-y (Islamic banks accelerated 10 percentage points faster than their conventional counterparts).

It expects the employee benefit and general takaful segments to chug along.

Regardless, the structural long-term growth prospects of STMB is bright based on an underpenetrated insurance space, favourable demographics and a huge domestic protection gap, HLIB Research said.

CGS-CIMB Research said it was forecasting a net profit of RM85.1mil for STMB in 4Q22, which would be 2.5% lower than the level in 3Q22 due to the seasonal slowdown in 4Q.

It retained its forecast for FY22 to FY24 earnings per share but raised its target price (TP) from RM4.00 to RM4.13 a share.

It said the strong growth in GEC is the potential rerating catalyst that underpins its “add” call.

UOB Kay Hian (UOBKH) Research also maintained its “buy’’ call with a TP of RM4.80 a share.

It said that the group’s “management alluded that the transition to MFRS 17 from MFRS 4 may see profit falling by 15% to 20% but return on equity expanding due to retained profit reclassification to CSM liability, resulting in a 30% to 45% decline in book value.”

“Also, MFRS 17 profit is expected to normalise back to MFRS 4 level within six years with only the booking of earned CSM profit, not including new business growth,” UOBKH Research said.

The research firm said that the group’s share price weakness has priced in the potential impact of MFRS 17.

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