ALLZ’s general insurance (GI) subsidiary  Allianz General Insurance Co (AGIC) has superior underwriting margins of 15.9% despite not having a larger  exposure  to  more  profitable  segments  like  fire  premiums.  This reiterates  our  view  of  its  underwriting  strength.  The  company  is determined  to  solidify  its  already  strong  market  position  prior  to industry  detariffication  and  may  shell  out  higher  expenses  to  enhance its  6,000  agency  force  while  still  maintaining  margins  as  a  priority. 
Upgrade ALLZ to BUY. 
 
- Top  market  positions  in  both  motor  and  non-motor  segments.  ALLZ’s  GI  subsidiary,  AGIC,  commands  the  top  market  position  in  the industry,  with  an  11.15%  share  in  2012,  based  on  Bank  Negara Malaysia’s  2012  insurance  statistics.  Delving  deeper  into  segmental breakdowns reveal that AGIC is also in the top three market positions for both motor and non-motor segments. It has a 12%-13.6% market share in the main forms of motor insurance coverage, behind Pacific & Orient (PO; Not Rated) and Kurnia (KSK; Not Rated). For non-motor segments, it was second behind MSIG, with a 10% market share, and was third in 
fire premiums, behind LPI Capital (LPI; NEUTRAL, FV: MYR15.75).  

- Superior  underwriting  margins.  Despite  not  having  a  larger  exposure to  profitable  segments  such  as  fire  premiums,  AGIC  has  superior underwriting  margins  at  15.9%.  This  reiterates  our  statement  on  its underwriting strength.  

- Getting  ahead  of  the  game  for  detariffication.  AGIC  believes  in upfront  investments  to  enhance  its  distribution  channels  and  customer service,  which  should  help  solidify  its  market  position  before  the industry’s detariffication by 2016. Higher expenses may be shelled out to enhance its 6,000-strong agency force, which has a reputation for strong productivity among Allianz entities across Asia.  

- Upgrade to BUY. Given its large market share, the Group is in a strong position  to  benefit  from  what  looks  like  an  upward  climb  in  the  GI industry’s underwriting cycle. ALLZ is also investing heavily to boost the distribution  might  of  its  life  insurance  segment,  which  should  bode  well for its income diversification moving forward. 

Source: RHB