KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) has maintained its earnings forecast for Syarikat Takaful Malaysia Keluarga Berhad (Takaful Malaysia), noting that the company remains cautiously optimistic.
The research firm said that most of the company's operations are performing well, with the exception of the employee benefit (EB) and motor segments.
Meanwhile, the retakaful rates have stabilised, and the risk of cash calls is limited under the new risk-based capital framework exposure draft.
"Overall, our estimates were kept, and we still believe Takaful Malaysia's risk-reward profile is skewed to the upside as it is undervalued," it said in a research note.
HLIB Research maintained its 'buy' call for the company with an unchanged target price of RM4.90.
According to the research firm, the company's sales of credit-related products remained resilient in the second quarter of 2024, riding on the tailcoat of strong Islamic banking growth via the bancassurance channel.
It added that Takaful Malaysia still has a dominant share within the Lembaga Pembiayaan Perumahan Sektor Awam (LPPSA) market of around 60 per cent which the business has been improving.
"In our view, this trend is likely to sustain given civil servants' wage hike in December could support higher demand for LPPSA loan financing," it said.
As for the EB segment, the firm noted that Takaful Malaysia did some pruning in the first quarter to protect margins; this is in line with its broad strategy in the past, which is to maintain pricing discipline and not compete in rates to secure EB business to avoid taking on unprofitable clients.
"We believe the strong production momentum will persist for the remainder of the year, since it has also recently introduced 'Legasi', a term life and critical illness takaful plan, onto its 'Kaotim' platform," it added.
Meanwhile, its motor takaful growth has tapered, giving slower business from BJAK, an online vehicle insurance marketplace.
"However, we are not overly worried since customers here are generally younger and we think they have a higher claims risk propensity, which could erode the already thin motor margin," it said.