Malayan Banking Bhd’s (Maybank) insurance/takaful arm Etiqa hosted a virtual Investor Day on 4 Jul 2024.
Etiqa is a regional player operating in five countries (with breakdown of FY23 gross premiums at 74.8% in Malaysia, 18.3% in Singapore, 4.9% in the Philippines, 1.8% in Indonesia, and 0.2% in Cambodia).
In FY23, Etiqa recorded a pre-tax profit of RM1.11bn (+133.7%) on the back of gross premium of RM11.5bn (+3.6%).
CGS International (CGS), in a Company Note cited today that Maybank’s Strategic Programme 6 (SP6) of the bank’s M25+ strategic plan states that the group aims to become a regional leader in insurance.
To this end, Etiqa has set targets of RM206m in FY23 and RM650m in FY24F for the upliftment of its gross written premium (GWP) from the initiatives under SP6. Etiqa beat its FY23 target with a GWP upliftment of RM320m and is currently ahead of its target in FY24F, based on 5M24 progress.
Two focus areas for growth
Going forward, Etiqa said it has identified two sweet spots for premium growth, i.e. bancassurance and motor insurance. CGS believes Etiqa will continue to leverage on Maybank’s strong banking franchise to grow these two types of insurance.
For motor insurance, it is focusing on preferred segments (for the coverage of higher-value motor vehicles) and will continue to work closely with Maybank’s auto financing centres and external partners to market its motor insurance products, Etiqa said.
Upping DPS forecasts and target price
CGS maintains their FY24-26F EPS forecasts but raise their projected DPS by circa 16.6% to 62-67 sen in FY24-26F. This arises from the increase in CGS’s assumed FY24-26F dividend payout ratio from 60% to 70%, which is closer to the ratio of 77.4% in FY23.
This leads to an increase in their DDM-based target price from RM10.60 to RM11.20 (cost of equity 10%; terminal growth rate of 4%).
CGS sees the potential write-backs of its management overlay, robust loan/fee income growth and capital management initiatives (which could lead to higher dividend payout ratios and ROE) as potential re-rating catalysts for Maybank.
As such, CGS reiterates an Add call on the stock.
Maybank To Elevate Etiqa As A Leading Regional Insurer
