Al Rajhi Capital: Tawuniya’s Q1 Profit Beats Forecasts, FY25 Outlook Remains Strong Despite Oil Risk

Al Rajhi Capital said on Thursday that the Company for Cooperative Insurance (Tawuniya) posted stronger-than-expected first-quarter earnings, with net profit reaching SAR 262 million, well above its estimate of SAR 156 million.

The brokerage expects Tawuniya’s net profit to rise to SAR 1.12 billion in 2025, SAR 1.21 billion in 2026, and SAR 1.38 billion by 2027, driven by continued momentum in medical and property & casualty (P&C) insurance lines.

Al Rajhi upgraded its rating on Tawuniya shares to “Overweight” from “Neutral”, setting a target price of SAR 158, up from SAR 155. The revised recommendation comes despite a cut in the stock’s valuation multiple, with the firm now assigning a price-to-book (P/B) ratio of 4.25x and a price-to-earnings (P/E) ratio of 21x, broadly in line with historical averages.

The downgrade in the valuation multiple reflects weaker sentiment toward high-growth stocks amid falling oil prices, the report said. While lower oil prices are not expected to impact growth in medical and motor segments, Al Rajhi noted that medium- to long-term prospects for the P&C business—particularly in construction-related contracts—may face headwinds.

Tawuniya’s Q1 2025 results, published earlier Thursday, extended its strong FY2024 performance. Revenue and net profit exceeded forecasts despite anticipated pressure on insurance service margins from a surge in corporate medical clients and a normalization in P&C margins. However, margins remained broadly stable year-on-year, allowing topline growth to translate into bottom-line gains.

Gross written premiums (GWP) saw sharp growth in the first quarter, supported by two major contract wins in the medical segment. Al Rajhi said the growth reaffirms Tawuniya’s competitive edge and the strength of its integrated, diversified insurance platform.

For 2025, the firm forecasts 21% GWP growth, followed by an average of 11% annually in 2026 and 2027. Insurance service margins are projected to moderate to 5.6% in FY25–27, down from 6.1% in FY24, as P&C margins normalize following an unusually low claims ratio of 37% in FY2024—compared with an average of 60% in the previous two years.

Motor insurance is expected to record low double-digit growth, supported by volume expansion and recent pricing discipline, while margins in that segment are seen improving slightly.

Al Rajhi also cited initiatives such as Population Health Management (PHM), the launch of Meena Clinics (79,000 patient visits in FY2024), and the Vitality program (1.1 million active users) as factors that could help mitigate margin pressure from expanding corporate medical coverage.

The brokerage assumes insurance revenue growth of 20% in 2025, followed by 12% in 2026 and 10% in 2027. Net profit margins are forecast to soften slightly to 5.0% in FY25–27, compared with 5.6% in FY2024, reflecting higher operating expenses tied to workforce expansion and the Meena Clinics rollout, as well as lower expected investment yields amid soft equity markets and interest rates.

At the target price of SAR 158, Al Rajhi sees an upside potential of approximately 14%, justifying its Overweight stance on the stock.