PETALING JAYA: Syarikat Takaful Malaysia Keluarga Bhd
(Takaful Malaysia) is poised to deliver a stronger financial performance in the coming quarters, underpinned by a structural shift in its product mix and improving margins.
Affin Hwang Investment Bank Research has reaffirmed its “buy” rating on Takaful Malaysia with an unchanged 12-month target price of RM3.80, citing the company’s evolving business dynamics that could accelerate profit recognition and enhance long-term returns.
The research house noted Takaful Malaysia’s strategic pivot towards shorter-tenure Credit Takaful products, particularly personal financing (PF) plans, which are increasingly replacing the longer-tenured mortgage reducing term Takaful (MRTT) offerings.
It said the shift of the ratio of MRTT:PF from 65:35 to 32:68, has been largely driven by bancatakaful partners capping mortgage refinancing terms at 10 years, which has pushed more borrowers toward shorter-term personal financing products.
Affin Hwang viewed this transition as a meaningful catalyst for earlier profit recognition.
“We believe that the shift in the average tail-length (from longer to shorter duration) of its portfolio will accelerate profit emergence of the contractual service margin as service delivery is now more ‘front-loaded’,” it explained.
While the full earnings impact may not be fully visible in 2025, the research house expected this shift to become more pronounced in the second half of the year and beyond, potentially lifting the company’s earnings trajectory and return on equity.
It added that industry-wide medical inflation and annual premium repricing have dampened demand for medical and hospitalisation takaful products.
While this reflects a challenging environment for policyholders, it opens up opportunities for insurers like Takaful Malaysia.
“Many are giving up on medical coverage and lowering their expectations,” the report notes, “which could translate into better margins for insurers and Takaful operators.”
The company is focusing on profitability by selectively underwriting only quality accounts.
In the first quarter of 2025, the employee benefit segment recorded a 77% year-on-year surge driven not only by increased volumes but also repricing strategies.
On the valuation front, Takaful Malaysia remained compelling. It trades at just 7.6 times forward earnings – below the peer average of around 10.5 times – while offering a projected dividend yield of 5.2% to 5.5% over 2025 to 2027.
