Analysts anticipate swift recovery in 4QFY21 for Takaful

KUCHING: Syarikat Takaful Malaysia Keluarga Bhd (Takaful) is expected to make a swift recovery in the fourth quarter of the financial year 2021 (4QFY21) with the reopening of the economy and the easing of movement restrictions, analysts say.

In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) noted that Takaful reported a core net profit of RM255.7 million for the first nine months of FY21 (9MFY21) due to slower recovery of net earned premium (NEP) on movement restrictions. Its 3QFY21 core net profit was at RM72.7 million, which was generally below expectations.

The research team said the lingering impact from movement restrictions on premiums in 3QFY21 were exacerbated by higher combined ratio.

“However, we think a swift recovery is on the cards for 4QFY21 (a similar trend after 2020’s movement restrictions) and we expect improvement in both premiums and combined ratio,” it opined.

Meanwhile, the research team at Hong Leong Investment Bank Bhd (HLIB Research) pointed out that given the economic reopening, it expected loan appetite to return, driving up sales of credit related products, and improving employee benefits segment.

“Also, LPPSA wakalah fee should start to expand again post-cut in 2H20, through organic means and gaining market share.

“As for any adverse swing in yield curve, we think it would not materially affect Takaful’s investment-related income; we note that in FY20, 88 per cent are recurring profit generated by Islamic debt securities, deposits and dividends while the balance 12 per cent comes from volatile realized and unrealized gains.

“Besides, structural long-term growth prospects of Takaful remains bright, in our view, looking at the underpenetrated insurance space, favourable demographics, and huge domestic protection gap,” it said.