• Allianz saw a 4Q20 net profit of RM144m (+8.2% yoy; +11.6% qoq), largely due to a lower effective tax rate while at the pre-tax profit level, it was flat yoy and down 7.6% qoq due to weaker performance at the Life unit
• 2020 results outperformed our and consensus estimates by 9.5%. The General unit did better in 2020 due to savings in motor claims while the Life unit was impacted by higher insurance contract liabilities and claims
• Maintain BUY, with 12-month Price Target of RM16.40 unchanged. Prospects continue to be underpinned by a recovery in business activities and its strong agency force and partnerships

2020 Net Profit Rose 5.7% Yoy Partially Underpinned by a Strong 4Q20

Though Allianz saw a stronger 4Q20 net profit (+8.2% yoy and +11.6% qoq), it was aided by a lower effective tax rate as the pre-tax profit level remained flat yoy and was down 7.6% qoq. The General unit reported a favourable 4Q20 underwriting profit due to lower net claims (from the motor policies) subsequent to the reinstatement of the MCO. Meanwhile, the Life unit saw pre-tax profit down 45% qoq and 25% yoy in 4Q20 due to higher insurance contract liabilities and provision for claims. For 2020, the impact of the MCO/CMCO did not hurt Allianz’s business badly, as the contraction in the 2Q20 gross written premium (GWP) was subsequently clawed back in 3Q-4Q20, with the overall GWP up 7.8% yoy (General: +7.2% yoy; Life: +8.2% yoy). At the group level, the overall net claims and reserve ratio declined to 72.5% in 2020 vs. 78.2% in 2019, given lower claims from the General unit. Allianz also saw more favourable net investment results and realized gains in 2020 (+9.7% yoy) though these were offset by lower fair value gains (-88.3% yoy).

Premium Growth Expected to Stay Resilient in 2021

In 2021, we believe that prospects in the General segment will be driven by a recovery in auto sales and through the Pos Malaysia tie-up while annualized new premium growth in the Life segment (2020: +13.5% yoy) will be led by its strong agency force and banca-partnership, as well as the pick-up in traditional policy sales.

Maintain BUY, With PT Unchanged at RM16.40

We reiterate our BUY rating on the stock, with an unchanged Price Target of RM16.40, based on these key assumptions: a 2021E P/BV target of 1.55x for its General operations and 2021E P/EV target of 1x for its Life operations. We raised our 2021E-22E earnings forecasts by 3.7% and 7.7%, respectively, as we relooked at certain assumptions such as claims, overheads and investment income. On GWP, we are forecasting a 5% yoy growth for 2021-23E. Downside risks: i) high inflation costs; ii) theft and fraud cases; and iii) more competitive rates from peers.

Source: Affin Hwang Research - 25 Feb 2021