MNRB Holdings (MNRB)’s FY13 earnings were within our expectations at 98.4% of our full year forecast. Profit rose 36% y-o-y on improved underwriting results and investment income. However, no dividends were announced. We keep our forecasts unchanged, but downgrade the stock to a SELL given its recent steep share price appreciation.
- Loss ratios looking better. MNRB’s net profit of MYR114.2m demonstrated a strong y-o-y growth of 36%, bolstered by improved underwriting profitability due to: i) claims ratio fell to 49.8% from 52.1% in FY12, and ii) stronger investment income attributed to higher gain on disposal of investments. That said, overall profits were offset slightly by a huge impairment loss of MYR16.8m arising from a provision and impairment of claims recovery from one retrocessionaire and an outstanding contribution due to Takaful Ikhlas SB.
- Largely contributed by reinsurance. Gross earned premiums/ contributions grew moderately at 7.8%, with the general reinsurance business controlling about 59% of total segment premiums. Its FY13 outlook is still intact in view of the rollout of Economic Transformation Programmes (ETP) projects, which have benefited reinsurers’ fire and miscellaneous classes. Meanwhile, family takaful grew at a strong 13.2% y-o-y but the general takaful segment declined 12.0% y-o-y. We expect to
see enhanced distribution channels and new product offerings in the takaful segment.
- FY15 forecast: Upgrade takaful but downgrade reinsurance. We are less optimistic on the larger reinsurance business as Bank Negara has begun liberalizing the level of voluntary cessions (VC) to its reinsurance arm, Malaysian Reinsurance (Malaysian Re). The VC level for classes of business other than motor and personal accident will be halved from a 5% quote share to 2.5% from 1 Jan 2014 to 31 Dec 2015.
- Expensive price. Despite the possibly better prospects for the takaful business, our overall FY14/15 forecasts remained unchanged due to the bleak outlook in the reinsurance business. We retain our FV of MYR3.30, pegged to a 0.6x FY14 P/BV, but downgrade our call to SELL.
Source: RHB
Caiyi Choo
I want buy at3.4
2013-07-13 10:22