Syarikat Takaful Malaysia Keluarga Berhad (Takaful Malaysia) is targeting annual growth of more than 30% in its regular contribution business as it diversifies beyond its traditional credit-related takaful portfolio, according to Hong Leong Investment Bank (HLIB).
Following a recent meeting with management, the research house said Takaful Malaysia’s regular contribution business is gaining traction, supported by deeper penetration of existing banking partners and an expanding product portfolio.
The company’s annualised premium equivalent (APE) market share has nearly doubled from 7.5% in 2022 to 14.1% in 2025, while regular contribution APE reached RM142 million last year.
HLIB said the growing regular contribution portfolio would progressively diversify Takaful Malaysia’s earnings base and provide a more sustainable income stream over the longer term.
Meanwhile, credit-related takaful remains highly profitable, with personal financing accounting for more than 70% of underwriting.
Management expects an average annual contractual service margin (CSM) release of approximately 15%, supported by the shorter five- to seven-year duration of personal financing products compared with mortgages.
Bank Rakyat’s RM1.6 Billion Acquisition Poses Potential Risk
HLIB highlighted the proposed RM1.6 billion acquisition of Takaful Ikhlas Family and Takaful Ikhlas General by Bank Rakyat as a potential medium-term risk to Takaful Malaysia’s bancatakaful business.
While the existing partnership between Takaful Malaysia and Bank Rakyat remains intact, the research house said the bank could eventually distribute more takaful products through Takaful Ikhlas following the acquisition.
Such a development could reduce Takaful Malaysia’s new business contributions and future CSM generation.
However, HLIB said the potential earnings impact remains difficult to quantify, given uncertainties surrounding contractual arrangements, the transition timeline and product allocation.
The research house views the development primarily as a distribution channel concentration risk rather than a fundamental impairment of Takaful Malaysia’s growth prospects.
It noted that the company is strengthening relationships with other banking partners while accelerating the development of its direct-to-consumer digital platform, Kaotim.
Kaotim Expansion To Drive Digital And Medical Growth
Takaful Malaysia plans to expand Kaotim beyond its existing four products to include travel, personal accident, savings and retirement offerings.
HLIB said the expansion could establish Kaotim as a more comprehensive direct-to-consumer takaful platform while reducing reliance on traditional bancatakaful distribution.
The company’s medical takaful business is also expected to benefit from participation in the MediAsas/Medical and Health Insurance and Takaful (MHIT) pilot.
This would allow Takaful Malaysia to broaden its medical product offerings and reach a larger customer base.
HLIB said the company’s direct distribution model, which eliminates agency commissions, provides a cost advantage, while continued digitalisation could improve operating efficiency as business volumes expand.
Management is prioritising product development and digital infrastructure before increasing marketing expenditure.
Strong Capital Position Supports Growth And Dividends
HLIB said Takaful Malaysia’s capital adequacy ratio remains comfortably above 200%, compared with the current supervisory target capital level of 130%.
The strong capital position provides sufficient flexibility to fund digital investments, maintain its Indonesian operations and pursue suitable regional opportunities without requiring additional equity or sukuk issuance.
The research house also noted that the company’s capital buffer should help it absorb the more stringent Risk-Based Capital Framework 2 (RBC2).
Based on HLIB’s industry checks, implementation of RBC2 could potentially be deferred from the draft 2027 timeline to 2029, although this remains unconfirmed.
Management also remains committed to maintaining sustainable dividend distributions while retaining sufficient capital to support future growth.
HLIB maintained its BUY recommendation on Takaful Malaysia with an unchanged target price of RM4.13, underpinned by expectations of stronger regular contribution growth, digital expansion and a more diversified takaful business.
