Allianz Malaysia’s (Allianz) reported better-than-expected results (above Affin and consensus estimates) for 1H19, as net profit rose 22.3% yoy, with the stronger performance driven by the Life business (of which, also saw a pre-tax profit growth of 92.2% yoy) . Key drivers to better performance at its Life unit include robust new business value growth of 34.2% yoy, aside from fair value gains for its portfolio. The General unit saw improved 1H19 underwriting results (+7.0% yoy) despite a 2.5% yoy decline in gross written premium. We reaffirm our BUY call on Allianz with a SOTP-based TP of RM17.80 (from RM17.60) as we raise our FY19E-21E core EPS by 6.0-10.4%.

A More Robust Life Division Profits Drive Overall Group Earnings

Allianz’s 1H19 net profit of RM216.6mm (+22.3% yoy) was was above consensus and Affin’s estimates. Qoq, results continued improving on the back of better investment results (1H19 portfolio returns at 9.0% vs. 2.0% in 1H18), though gross written premium (GWP) declined by 5.1% at the General segment while Life’s segment GWP was flat qoq. For 1H19, Allianz’s topline, as reflected by a GWP growth of 4.8% yoy, saw a decline of 2.5% yoy for the General segment (motor insurance accounts for 62.3% of GWP, followed by fire at 15.3%) while GWP for the Life segment was up 11.6% yoy. Allianz’s Life business annualized new premiums growth of 14.7% yoy (at RM285.3m) was primarily driven by bancassurance and employee benefits channels.

Life and General Segments Saw PBT Up 92.2% Yoy and 7.1% Yoy

The General division contributed 52% of the group’s PBT and was up 7.1% yoy in 1H19 largely due to lower GWP and an impairment for receivables. Meanwhile, Life segment contributed 48% of group PBT, and was up 92.2% yoy in 1H19 on the back of sale of higher profit margin products (such as death benefits, which have been one of the key drivers).

Reaffirm BUY Rating and Target Price of RM17.80

We reaffirm our BUY rating and SOTP-based target price of RM17.80 (key assumptions: Target 2020E P/BV of 1.7x for its General operations and target 2020E P/EV of 1x for its Life operations). We have revised our 2019E/20E/21E net earnings by +10.4%/+6.1%/+6.0% to account for better premium growth and investment income/gains.

Source: Affin Hwang Research - 23 Aug 2019