PETALING JAYA: Syarikat Takaful Malaysia Keluarga Bhd
’s (Takaful Malaysia) recent deal with RHB Islamic Bank Bhd provides long-term earnings visibility and stability of contributions for the former, analysts say.
Takaful Malaysia signed two new 20-year exclusive bancatakaful service agreements with RHB Islamic, effective from Aug 1, one for family takaful and another for general takaful products.
The deal supports Takaful Malaysia’s embedded value growth and broadens its bank-partner network, currently at 17.
It also underscores Takaful Malaysia’s dominant position in Malaysia’s credit protection takaful segment, said CIMB Research.
Takaful Malaysia’s 20-year service agreement with RHB Islamic Bank Bhd further strengthens the company’s future earnings base, particularly from credit-related takaful products such as mortgage reducing term takaful and personal-financing protection.
These segments currently contribute about 50% to 60% of Takaful Malaysia’s overall earnings and are predominantly driven by bancatakaful partnerships.
The remaining portion is largely supported by coverage for civil-servant loans under the Public Sector Home Financing Board scheme.
Takaful Malaysia underwrites the largest credit protection portfolio in the Malaysian market, maintaining its leading position with a 26% market share.
The new agreement marks a renewal of the company’s long-standing bancatakaful partnership with RHB Islamic, which began in 2015.
The initial five-year agreement from 2015 to 2020 and the first renewal on Aug 1, 2020 to July this year have now been superseded by a longer, 20-year exclusivity period, reflecting a deepening of the strategic relationship
CIMB Research views this long-term renewal as a strategic positive for Takaful Malaysia as RHB Islamic is one of the company’s top five bancatakaful issuers, given the latter’s position as a preferred partner, contributing about 10% of total family takaful contributions. Maintaining the partnership ensures continuity of business from a meaningful channel.
CIMB Research maintained its earnings per share forecasts for Takaful Malaysia and its “buy” call on the stock with a target price of RM4.60 a share.
At the current price, CIMB Research said it believes Takaful Malaysia is trading at an attractive price-to-book ratio for next year of 1.2 times, which is about 40% below the five-year mean of two times.
CIMB Research said it believes the discount is unjustified given Takaful Malaysia’s superior return on equity of 19%, which is about 2.2 to 6.8 percentage points higher than that of listed peers such as LPI Capital Bhd and Allianz Malaysia Bhd, and the strong growth in takaful contributions.
