Investment Highlights

• We initiate coverage on Allianz Malaysia (Allianz) with a BUY call and fair value of RM17.40/share derived from SOP valuation. The group is involved in conventional general and life insurance business through its 100% owned subsidiaries, Allianz General Insurance Company Malaysia (AGIC) and Allianz Life Insurance Malaysia (ALIM).

• Our investment case for Allianz is based on the following:
  
  i. Supported by parent Allianz SE in Germany with strong credit ratings and solvency ratio. Allianz SE, one of the leading insurers in the world, holds a 65.22% stake in Allianz Malaysia;
  
  ii. Above-industry gross written premiums (GWP) growth for the general and life insurance business;
  
  iii. Recovering annualized new premiums (ANP) for the life insurance business from a weaker 2Q20 which saw selling activities for life policies impacted by the MCO;
  
  iv. A strong market share in the general and life insurance business. Allianz is the largest general insurer domestically with a 12.9% market share. It is ranked No. 1 in motor insurance and No. 5 in life insurance with a market share of 8.0% based on ANP;
  
  v. New agreement inked with Pos Malaysia (Pos) in Oct 2019 will bolster growth in GWP for AGIC. The new agreement places Allianz as the preferred insurer for Pos. This is a step up in collaboration from the previous arrangement where Allianz was only one of a panel of insurers for Pos. We see this as an opportunity for AGIC to increase its sales in both motor and non-motor insurance through Pos;
  
  vi. Improved combined ratio at 92.3% for 6M20 with lower motor and medical claims, reducing its net claims ratio;
  
  vii. Stable commission and management expense ratios. The management expense ratio that is lower than the industry’s for general insurance business reflects its cost efficiency which will give it an advantage in the pricing of insurance products; and
  
  viii. A dividend policy of paying out at least 30.0% of its after tax profits. We project a dividend yield of 4.7%/5.0% for FY20/21.

Source: AmInvest Research - 1 Oct 2020