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This article first appeared in The Edge Financial Daily, on November 11, 2015.

 

Syarikat Takaful Malaysia Bhd
Nov 9 (RM3.82)

Maintain neutral with a target price (TP) of RM3.42: Syarikat Takaful Malaysia Bhd’s (STMB) nine-month financial year 2015 (9MFY15) profit after zakat, taxes and minority interests (Paztmi) of RM122.4 million increased 9% year-on-year (y-o-y) in tandem with improved net earned contributions of RM936.8 million (8% y-o-y).

Syarikat-Takaful_fd111115_theedgemarkets

This resulted in a higher wakalah fee income to the group. Overall, reported earnings were within our expectations, accounting for 72% of full-year estimates, but below street expectations of only 69%.

In the third quarter financial year 2015, STMB’s Paztmi of RM37.2 million achieved a respectable underlying growth of 7% y-o-y, mainly due to strong growth in net earned contributions of RM304.5 million (+12% y-o-y).

The top-line growth could have fared better if it was not owing to a slight shortfall in general takaful’s gross earned contributions of RM112.6 million (-2.8% y-o-y). Nevertheless, it was partially offset by strong gross earned contributions from family takaful business of RM252.3 million (+12% y-o-y). 

In the meantime, the group still produced a healthy underwriting profit margin of 22.3% contributed by lower net benefit and claims of RM150.9 million (-18% y-o-y). Cumulatively, the margin remained stable at 15% despite the fact that this was down from 20% in the corresponding period last year. Apart from higher contribution income, investment income also improved 6% to RM68.8 million.

Meanwhile, the lower surplus transfer from family takaful of RM17.3 million (- 1.1% y-o-y) for the quarter was mainly due to the shift to wakalah model products and lower realised gains on disposal of investments. — MIDF Research, Nov 9

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