PETALING JAYA: The country’s oldest takaful operator Syarikat Takaful Malaysia Keluarga Bhd is expected to face some cost pressures in the form of higher retakaful costs in the second half of the year (2H23).

While maintaining its “outperform” call on the takaful operator, Kenanga Research said higher retakaful costs may continue to be a bane for the company.

“On takaful service expenses, it is noted that claims only saw an increase of 15% (with claims-to-revenue at 58.4%, a drop of five percentage points). The group attributed higher retakaful costs to be the main cause of the surge.

“It is noted that more frequent floods have led to the reassessment of reinsurance premiums, which we reckon may only be upside-biased going forward.

“No thanks to this, the takaful service result ended 8% lower,” the research house said based on its recent briefing with the company.

In 1H23, Takaful Malaysia saw an 18% year-on-year (y-o-y) increase in takaful revenue.

From the family takaful end (+22%), credit-related products remain as the lion’s share, accounting for around 80% of its portfolio.

This continues to be backed by strong bancatakaful contributions with new partners in Agrobank and Bank Muamalat Malaysia Bhd.

“On the flipside, we gather general takaful mostly gained thanks to a growing motor exposure.

“With regards to fire-class products, the group reflects that it has been able to tide the ongoing fire detariffication by repackaging its residential products without compromising on its premiums.”