Syarikat Takaful’s FY20 outlook looks less promising
KUCHING: Syarikat Takaful Malaysia Keluarga Bhd’s (Syarikat Takaful) financial year 2020 (FY20) outlook looks to be less promising by analysts as the Covid-19 pandemic and associated economic impact are posing new challenges and uncertainties.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) downgraded its outlook for the takaful player due to the weakening economic indicators arising from the Covid-19 outbreak and extended Movement Control Order (MCO) to dampen insurance demand moving forward.
“Thus, we are expecting lower growth of contributions from both its Family and General takaful segment,” MIDF Research said in a research note.
On another note, MIDF Research posited the the takaful industry seems to be facing an increasingly competitive environment during the pandemic.
The research arm noted that this is evidenced by the potential loss of a bancatakaful partner (RHB Islamic Bank) which might further jeopardise earnings growth in the second half of FY20 (2HFY20) and entrance of new takaful player ( FWD Takaful) into the Malaysian market.
“In addition, the ongoing detariffication of the motor and fire insurance continues to present a less encouraging performance from its general insurance segment.
“This segment alone contributes approximately 30 per cent to its group’s gross earned contribution.”
Meanwhile, MIDF Research was also cautiously optimistic on the group to weather the increasingly competitive environment as the group continues to invest in digital initiatives and deals with Bank Rakyat, Bank Islam and Affin Bank remain intact.
“The relatively low combined ratio would also enable the group to safeguard its profitability.”
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the Covid19 pandemic and the associated economic impact are posing new challenges and uncertainties.
“Given the adverse impact likely to materialise in the second and third quarters given the extended MCO and cautious consumer spending ahead, operating revenue will likely be a stretch in the coming months,” Kenanga Research said.
Although earnings growth excitement could be tapering off, the research arm still anticipated the group to remain a prominent player in the Takaful industry as a beneficiary of Bank Negara’s agenda to expand the country’s Islamic finance proportion to 40 per cent.
“Improvements to its operating ratios could allow the group to remain sustainable while introducing more lessconventional, non-credit related products to grow its market share.
“Additionally, efforts to promote a digitalised front could allow the group to cater to underserved areas while cutting back on expenses such as commissions and agent fees.”