• Still BUY, new MYR18.20 TP from MYR16.70, 11% upside and c.4% FY24F yield. 1H23 earnings of MYR339m (+13% YoY) were mainly from greater insurance revenue and investment returns, though higher claims continued to weigh down on Allianz Malaysia. While we have yet to incorporate Malaysia Financial Reporting Standards 17 (MFRS17) adjustments into our FY23F-25F earnings, we will do so in due course.

• Group results review. In 2Q23, insurance revenue rose 8% YoY (flat QoQ) on greater contributions from both Allianz General (AGIC) and Allianz Life Insurance Malaysia (ALIM). Higher claims (+34% YoY, +19% QoQ) were a recurring theme across both segments, with our estimated group claims ratio at 55.2% (2Q22: 44.2%, 1Q23: 48.0%). Nevertheless, a net investment gain of MYR196m vs a net loss in 2Q22 led to a PAT of MYR167m for the quarter (+11% YoY, -3% QoQ). Cumulatively, 1H23 earnings of MYR339m were up 13% YoY.

• AGIC: Brought down by higher claims. Insurance revenue increased 7% YoY (QoQ: +1%) on higher motor insurance sales. Claims, however, continued to remain elevated, increasing 11% YoY (QoQ: +13%) – mainly driven by motor claims. Consequently, despite the higher investment returns recorded (+50% YoY, -2% QoQ), segment PBT slipped 5% YoY (QoQ: -11%). As at March (latest available), AGIC maintained its no. 1 market ranking in the domestic general insurance industry, with a 13.4% market share.

• ALIM: Benefitting from a low base. Insurance revenue increased 9% YoY (flat QoQ) on strong growth in recurring premium products. As guided, claims – particularly from the investment-linked protection business – continued their upwards trend (+70% YoY, +27% QoQ). Conversely, ALIM recorded a net investment gain of MYR139m against a net loss of MYR164m in 2Q22 (recall that this was due to adverse bond yield movements) – this led to a higher segment PBT of MYR99m (+14% YoY, +2% QoQ). Contractual service margin (CSM) growth of 3% YoY (+1% QoQ) is positive for future profit growth.

• Forecasts and TP. We make no changes to our forecasts, but raise our TP to MYR18.20 after rolling forward our valuation year to FY24F, and imputing a higher embedded value assumption as per management’s latest guidance. Our TP includes a 6% ESG premium as per our in-house proprietary ESG scoring methodology and ALLZ’s 3.3 ESG score. However, we reiterate that our forecasts have yet to incorporate MFRS17 adjustments at present. We continue to like the group for its strong brand equity and market presence, along with its ESG leadership among Malaysian insurers.

Source: RHB Securities Research - 24 Aug 2023