KUALA LUMPUR (July 9): Malayan Banking Bhd’s (KL:MAYBANK) insurance arm Etiqa arm is ahead of its own target for gross written premium with faster-than-industry growth between January and May, CGS International flagged.

Etiqa has beaten last year’s target for increase in gross written premium and is currently ahead of its target of RM650 million based on the progress up until May, CGS said in a report following Etiqa’s investors briefing. The research house maintained Maybank on ‘add’ equivalent to the ‘buy’ call.

“We take a positive view that Etiqa’s gross premium has been growing faster than the industry,” CGS said.

Etiqa, operating in five countries, reported 133.7% jump in pre-tax profit to RM1.11 billion for the financial year ended Dec 31, 2023 (FY2023) driven by gross premiums of RM11.5 billion. Pre-tax profit rose nearly 20% year-on-year to RM285.4 million in the first quarter thanks to 33% jump in premiums.

Under Maybank’s M25+ strategic plan, Maybank stated that it aims to become a regional leader in insurance by strengthening its life insurance coverage in the core markets of Malaysia and Singapore, leveraging on its existing platform and continuously scaling and expanding regionally.

Etiqa has identified bancassurance and motor insurance as two sweet spots for premium growth.

“We think that the premium growth for Etiqa’s bancassurance business would come from the loan expansion of Maybank” from policies taken for various new loans, such as mortgage reducing term assurance, fire, and automotive as well as the launch of new products, CGS said.

For its motor insurance business in Malaysia, CGS noted that Etiqa is focusing on preferred segments to insure higher-value motor vehicles to enhance its profitability while working closely with Maybank’s auto finance centres and external partners to market its motor insurance products. 

CGS now believes there is more upside to Maybank’s share price. The house raised the projected dividends per share by about 16.6% to 62 sen-67 sen for FY2024-FY2026, lifting its dividend discount model-based target price to RM11.20 from RM10.60 for Maybank.

Key downside risks include potential deterioration in Maybank’s loan growth and asset quality, it flagged.

Maybank shares's closed a tad higher at RM10.06, translating into a market capitalisation of RM121.39 billion on Bursa Malaysia.

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