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MNRB is underrated

Koon Yew Yin 19 March 2021    

MNRB is the only reinsurance company in Malaysia and holds the monopoly of reinsurance.  

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There are 21 insurance companies in Malaysia and it is mandatory and compulsory for all insurance company in Malaysia to reinsure 10-25% (depending on class and size of risk) of their business with MNRB. 

PNB controlled 12.8% and Amanah Saham Bumiputra controlled 44.1%, totalling 57 % of the company and 43% of the total issued shares are in the open market.   

MNRB Holdings Bhd is a reinsurance provider as reinsurance as per the takaful system according to the sharia law. It provides reinsurance services in the areas of fire, marine, motor, miscellaneous, and family retakaful. The company is also engaged in investment holding business and mainly operates in Malaysia and United Arab Emirates.

MNRB is a subsidiary of PNB, engages in insurance and reinsurance businesses. It underwrites various classes of general reinsurance and manages MMIP (Malaysian Motor Insurance Pool), providing motor insurance to vehicle owners who are unable to obtain cover for their vehicles. MNRB commands 25% of market share through treaty. Apart from underwriting profit, MNRB derived other profit from portfolio investment. 

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There are 21 general insurance players in Malaysia and these are the top 10 insurance companies in Malaysia: 

1. Allianz;

2. AM Kurnia;

3. Axa Affin;

4. Chubb;

5. Etiqa;

6. London Pacific;

7. Liberty;

8. MSIG;

9. Tokio Marine;

10. Zurich.

That means MNRB is sure to make profit like a bank or other well-established companies that are sure to make profit. In fact, the Covid 19 pandemic is affecting people’s movement and almost all the listed companies. MNRB is one of the exceptions.  

MNRB’s latest EPS for quarter ending December was 6 sen and 5 sen for its previous. Since it has sure profit growth, it is safe to assume its annual EPS will 4 times 6 sen = 24 sen. Its last traded price is Rm 1.33 divided by 22 sen = 5.5 PE ration.  

Share price divided by earning is called price earnings ratio, which is the best measure of rating any stock.  

PE of insurance companies comparison 

NamePrice RmLatest EPSX 4 = Annual EPSPE 
MNRB1.386 sen24 sen5.8
LPI13.6023.9 sen95.6 sen14.2 
MBSB68 sen1.42 sen5.68 sen12
London Pacific Rm 13.6022.9 sen92 sen14.8
AM KuniaRm 2.716.5 sen11.5 sen10.4
TakafulRm 4.9812.42 sen49.7 sen10.0  

Conclusion: The PE of insurance companies  comparison shows that MNRB is the cheapest in term on PE ratio. This is so ridiculous because MNRB has the monopoly of selling reinsurance and all the 21 insurance companies have to buy 10-25% of reinsurance from MNRB. In fact, MNRB with its inherent advantage, should deserve a much higher rating than any one of the leading insurance companies. Currently it is selling at the cheapest PE.  

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