Syarikat Takaful expects modest earnings growth

PETALING JAYA: Syarikat Takaful Malaysia Bhd (STMB), which saw its first quarter earnings come in almost flat, expects modest growth in view of the challenging and competitive business environment in 2016, particularly due to the volatile and uncertain global economy.
“We remain cautiously optimistic on maintaining the earnings outlook for the year due to stable business expansion via our multi-channel distribution strategy despite lower expected investment returns,” its president and managing director Datuk Hassan Kamil told SunBiz recently.
STMB’s first-quarter net profit to March 31, 2016 was a marginal 0.29% increase at RM46.62 million on the back of a 12.58% jump in revenue to RM633.25 million.
The almost flattish earnings was mainly attributable to lower tax expense, which was partially offset by lower net investment income, while the higher revenue was contributed by increased sales generated by both the family takaful and the general takaful businesses.
For financial year 2015 (FY15), the Islamic insurer registered an 11% increase in net profit of RM155.9 million compared with RM140.5 million in 2014. Its group operating revenue stood at RM1.8 billion in 2015, up from RM1.7 billion in 2014.
MIDF Research, which has STMB as its top pick in the insurance sector, noted that the takaful operator took the second spot for delivering the best return of equity (24.53%) among 44 government-linked companies in 2015.
STMB’s strong performance last year saw MIDF Research maintain its earnings forecast of 11% and 12% growth for FY16 and FY 17, respectively.
Hassan said that growing the operators’ family takaful and general takaful businesses along with strong expense management discipline will be the major contributors to the expanding contribution (premiums) for 2016.
“We are anticipating the contributions to rise along with the increasing acceptance of our products due to our continuous focus on promoting and delivering comprehensive products and services to our valued customers,” he said.
For 2016, Hassan is anticipating a 15% new business contribution growth, with stronger growth from employee benefits, credit-related, and motor takaful businesses.
For FY15, STMB’s total new business contribution was RM1.26 billion.
For the fourth quarter of 2015 (Q4’15), STMB sustained its position as the market leader in the family takaful business, capturing a 23% share. This translates into RM823 million in gross contributions.
In addition, the company also maintained its first ranking in the group family takaful business, securing 26% of the market share that translates into RM445 million in gross contributions.
The industry report until Q4’15 witnessed STMB sustaining its position as the second largest general takaful operator in the country, capturing 19% of the general takaful business.
“At Takaful Malaysia, our focus has always been on increasing our market share, and towards this our across-the-board strategies have held us in good stead over the recent years, and we intend to continue with these strategies,” Hassan said.
These strategies include the introduction of new and enhanced competitive priced products for its customers’ needs, as well as expanding its distribution capabilities.
“Enhancing products and introduction of new technology rank high on our list of initiatives too. We have also been open to partnership tie-ups with Islamic banks, implementing investor relations programs and continuing our brand awareness campaign initiatives are all strategies that are in the pipeline for 2016,” Hassan said.
He said STMB will continue to emphasise the four core areas of customer reach, operational agility, cost competitiveness and stakeholder confidence.
“Our ultimate goal is to outpace the market and firmly establish ourselves as the preferred choice, not just among takaful companies, but all conventional insurance providers as well.
“Being the first takaful company in Malaysia, we also strive to be known as a dynamic, customer-oriented company that offers the best service levels and competitive products with a strong brand and image.
“We will be strengthening our vibrant image through various advertising channels and marketing activities to achieve brand visibility and appeal for Takaful Malaysia,” Hassan said.