PETALING JAYA: Analysts are overall optimistic on Malayan Banking Bhd
(Maybank), highlighting the opportunities presented by the group’s insurance and takaful arm, Etiqa.
To put in context, Etiqa contributed RM1.1bil in pre-tax profit for Maybank’s financial year 2023 which accounted for about 9% of total group’s pre-tax profit.
Hong Leong Investment Bank (HLIB) Research stated Etiqa has done well over the years as it grew its gross premium and profit before tax by eight to nine times from financial year 2005 to 2023.
“It has a return on equity output of about 12% on a standalone basis.
“We understand 75% of its gross premiums are derived domestically while the balance 25% is from Singapore, the Philippines, Indonesia and Cambodia,” the research house stated in a report following an Investor Day event held by Maybank that was focused on Etiqa.
Within the Malaysian insurance and takaful market, HLIB Research stated that Etiqa has a strong market share of 16%.
Etiqa also outpaced industry growth after having inked a six-year gross contribution compound annual growth rate of 11% from 2017 to 2023 as compared to the industry average of 5%.
Etiqa has the third largest market share of 13% in the life insurer and family takaful space with its new business premium outgrowing the industry.
“The general segment is led by agency while life or family segment is driven by bancassurance with a 55% and 65% of total net adjusted premium, respectively,” HLIB Research stated.
Kenanga Research noted Etiqa has a base of 4.2 million customers of which 45% of them appear to have been acquired via bancassurance channels. It is also noted that Maybank has an overall portfolio of 12.3 million customers, of which only 3.3 million are also Etiqa customers.
“The group anticipates its bancassurance channel to continue to tap into the wider group’s regional network, although we gather that most growth is attributed to life insurance products,” it stated in a report.
It added that Etiqa sees opportunities to widen its overseas presence by tapping into the wider group’s regional network and to adopt more sustainable frameworks.
Kenanga Research said the insurance group also sees opportunities open from the gradual utilisation of data analytics to ensure more effective targeting and offerings towards potential customers within the bancassurance space.
“Supplementing the growth of its general business, the group looks towards more holistic services to corporate clients with comprehensive risk advisory to ensure more relevant premium rates being underwritten”
According to Kenanga Research, the group also plans to widen its profit margins by targeting higher value vehicles and tapping onto its auto finance centres to accelerate growth.
“While the group already holds a leading presence amongst its peers, it seeks to defend its position via new innovations to its ecosystem with more direct engagement with customers through its mobile app on air travel notifications, policy reminders and rebates for prolonged uses.”
The research house said Etiqa has moved to not underwrite any greenfield coal power generation plants by 2025, as in line with Maybank’s group-wide objective to achieve net-zero carbon equivalent by 2050.
It would also work with its partners and the wider supply chain to advocate more sustainable practices whilst offering green insurance products and services.
Kenanga Research maintained an “outperform” call on Maybank with a target price (TP) of RM11 per share.
“Maybank is expected to demonstrate operational resilience whilst sustaining its position as the leading bank in terms of market share.
“We believe in Maybank’s ability to provide the most sustainable returns via its consistent market share albeit now with more moderate dividend yields by about 6%,”
HLIB Research retained its “hold” call on the group at a TP of RM9.60 per share.
“After learning more about Etiqa on its business strategies and good execution track record, we believe it will continue to flourish in the insurance space,” the research house said.
