• Management is optimistic to see more underwriting activities from motor segment

• 15% Cash Back campaign will remain

• Focus on lean operation

• Maintain BUY with adjusted TP of RM4.90 (from RM4.84)

We visited Syarikat Takaful Malaysia, to learn about recent developments in the company. Pursuant to the meeting, we gather that the management is taking proactive approach in light of the 2nd phase of motor liberalisation.

Higher contribution from motor insurance is expected. The management expressed its optimism to seeing more underwriting activities in the motor segment. With 45% exposure in the general takaful business, the management estimate that contribution from said segment will continue its upward trend, outperforming the conventional insurance business' flattish trajectory.

15% Cash Back campaign for general takaful products will remain. While the management understand the impact of motor detarriffication, (e.g. stiff price war and compressed margin) it will maintain the 15% cash back campaign (refer Diagram 1 and 2), given it is a unique competitive proposition to potential customers. Additionally, the company is not overly concern on the sustainability of this campaign. This is stemming from its strong underwriting fundamental and unique takaful mechanism compared to conventional insurers', plus its consistent surplus/profit available in Takaful fund every year. Given the continuation of this campaign, we are optimistic that the Group will be able to sustain the growth for its motor insurance segment. In addition, we note that other insurance companies are scaling back on this segment, which we believe would leave room for the Group to expand its market share.

Focus on lean operation. Management is putting more focus in reducing its overall cost of the business. Few initiatives have been set up to expedite claim process and adopt cost-efficient distribution channel, which will be primarily supported by company’s digital strategy. However, we do not foresee the impact to be immediate but will most likely be in the next 2-3 years.

Source: MIDF Research - 17 Jul 2017