HOLD maintained

MNRB’s FY23 earnings were within expectations. We nevertheless raise our FY24-FY26 estimates by 6-27% on better investment income assumptions. Correspondingly, our Gordon Growth Model (GGM)-derived TP is raised to MYR1.09 from MYR1.04 (COE: 9.4%, ROE: 5%, LT growth: 3%). We maintain a HOLD call on MNRB.

In line with our forecast

MNRB’s 4QFY23 net profit of MYR48m (-6% YoY, -33% QoQ) took FY23 net profit to MYR120m (+5% YoY). The results were within expectations at 98% of our full-year forecast. Net earned premiums rose 19% YoY in FY23, while the rise in interest rates contributed to better investment income. The group’s combined ratio rose marginally to 107% from 105% in FY22, due mainly to a higher claims ratio. On a segmental basis, the general takaful division outperformed the rest with a 27% YoY increase in pretax profit.

Decent divisional performance

The reinsurance division saw its gross written contributions (GWC) rise 15% YoY in FY23. Its overall combined ratio improved to 133% in FY23 from 135% in FY22. General Takaful saw its GWC jump 30% YoY, mitigated in part by a higher claims and commission ratio. Family takaful saw a gross earned premium (GEP) growth of 7% YoY, but its claims ratio was also higher during the year.

Raising our earnings

With bond yields softening, we expect investment income for the group to come in stronger this year. This, however, is expected to be mitigated in part by the adoption of MFRS17, which could negatively impact earnings from Family Takaful, in particular. We raise FY24-FY26E earnings by 6%- 27% respectively.

Source: Maybank Research - 30 May 2023