BIMB Integrated Annual Report 2017

MANAGEMENT DISCUSSION & ANALYSIS SYARIKAT TAKAFUL MALAYSIA BERHAD’S PERFORMANCE REVIEW & OUTLOOK plan specially targeting corporate clients who wish to provide an option to their employees to supplement their existing employee benefits schemes whilst at the same time manage health costs. Effective July 2017, motor detariffication has also led to increased competition. To avoid falling into a price war, the Company enhanced its motor product, provided more competitive pricing for certain segments with good claims experience, and continued with its 15% Cash Back campaign as no claim reward, in order to attract the right customer segments. In readiness for the upcoming detariffication in fire insurance, Takaful Malaysia also embarked on new product development initiatives to offer three new fire products with enhanced features to be introduced in early 2018. Leveraging on the opportunities provided by digitalisation, Takaful Malaysia successfully implemented its Click for Cover online sales portal to the public for its motor takaful and personal accident plans. This online sales portal has complete digital processes for all promotions, queries and enrolment to renewals and claims processing; giving a hassle-free experience to both the employers and their employees. This digital effort was also in line with BNM’s initiative for diversification of distribution channels to make protection more accessible and affordable to the public under the liberalisation of life and family takaful market. In supporting this initiative, the Company also launched its direct term plan whereby customers can now walk-in to any of the Takaful my Care Centres to apply for this plan directly. On its investment front, Takaful Malaysia adhered to prudent and vigilant investment strategies. The strategic asset allocation has been skewed towards achieving long-term returns while minimising the volatility and value at risk of the managed portfolios. As for equity investment, focus was placed on stocks with good fundamentals, stable historical income, strong management team, long-term earnings visibility and solid balance sheet. FINANCIAL PERFORMANCE Takaful Malaysia recorded a PBZT of RM253.7 million for FY2017, an increase of 14.79% compared to RM221.0 million achieved the previous year. Net Return on Equity (“ROE”) was 26.72% as compared to 24.88% in 2016. Takaful Malaysia’s operating revenue rose 6.25% in FY2017 to RM2.1 billion from RM2.0 billion in the preceding year. The increase was mainly attributed to higher sales generated by both Family Takaful and General Takaful business. For FY2017, Family Takaful generated gross earned contributions of RM1.3 billion, an increase of 2.85% compared to RM1.2 billion in FY2016. The increase was due to higher sales from Family Takaful mortgage related products. General Takaful recorded gross earned contributions of RM554.2 million, an increase of 11.15%, compared to RM498.6 million achieved in the previous year. The growth was mainly from fire and motor classes. The improvement of revenue and profit were mainly attributable to higher earnings generated by the Family Takaful business and better underwriting results, in addition to higher net Wakalah fee income arising from our robust business growth in the General Takaful business. Outlook The changing outlook ahead for Malaysia’s insurance industry is likely to have an impact on Takaful Malaysia’s financial performance in 2018. However, since the launch of the transformation programme in 2009, the Company has been resilient in achieving sustainable top and bottom line growth over the years. Takaful Malaysia is confident that with effective execution of the strategies planned for the year, the Company’s premium income and earnings will continue to grow in 2018. Takaful Malaysia in 2018 will remain focused on sustaining its position as the market leader in the Family Takaful business whilst expanding its market share in the General Takaful business to establish a strong foothold in the industry. The Company will continue to enhance its digital capability to increase its product and service accessibility to the consumers by intensifying its online marketing initiatives. The Company will also embark on multiple digital initiatives to further develop ‘customer centric’ value propositions to remain competitive in the industry. The Company will carry out its key initiatives, including an active management strategy as well as prudent investment and underwriting activities to deliver sustainable results for its shareholders and promote financial security to its customers. It will amplify its brand presence and the 15%Cash Back offered to its customers for making no claims during the coverage period. Takaful Malaysia will continue to emphasise the four core areas of customer reach, operational agility, cost competitiveness and stakeholder confidence to firmly establish the Company as the preferred choice for insurance/ takaful amongst consumers. 60 BIMB HOLDINGS BERHAD Integrated Annual Report 2017