PETALING JAYA: MNRB Holdings Bhd’s strong growth as seen in its recent financial results is expected to continue into the rest of the year.
This follows the group mitigating some of its risks through increased premiums while the outlook on interest rates, which will likely stay stable for the time being, also helps improve its outlook.
According to Maybank Investment Bank (Maybank IB) Research, momentum for MNRB’s top line growth has generally been positive, noting its gross premiums/contributions (GPC) had risen 12.6% year-on-year in the first quarter of its financial year 2024 (FY24).
“We expect GPC momentum to be sustained for its General Takaful division, driven by buoyant car sales as well as its reinsurance/retakaful business. Barring any exceptionally large claims, we expect the group’s earnings to generally fare better this year,” it said.
It noted the group has taken various proactive measures to mitigate future losses and these include increasing pricing and deductibles for flood cover following the 2021 flooding. MNRB had also pushed for replacing overriding commissions with profit commissions and reducing the number of lines to be ceded and imposed for a quota share.
It also expects the shift away from more unprofitable reinsurance businesses to more stable ones, such as managing general agents which should help the group better manage its claims experience.
Meanwhile, Maybank IB Research noted that MNRB’s investment portfolio benefited significantly from the decline in bond yields during the quarter, which resulted in a turnaround of fortunes pertaining to investment income across all entities.
“The investment portfolio remains conservative, both loan and foreign bank deposits making up a sizable 45% of its total investments. Low-risk assets account for 20% while secured/unsecured credit financial facilities make up 24%,” it said.
With expectations of more stable interest rates, the research house said MNRB will likely have positive gains on its investments this financial year, as well as positive contributions from its 20%-associate company Labuan Re.
“We upgrade the FY24 to FY26 forecast earnings by 6%-11% to factor in a higher investment income. We upgrade MNRB to a “buy” with a higher Gordon Growth Model-derived target price of RM1.40 from RM1.09 before,” it said.
The target price reflects a price to book ratio of 0.41 times and a forward 2023 price-to-earnings ratio (PER) of 6.7 times, it said.