• Maintain BUY, new MYR21.10 TP from MYR18.70, 15% upside withc.6% FY24F yield. After Allianz Malaysia’s 3Q23 results briefing, webelieve that it still has more value to offer despite the recent share pricerally. We also laud management’s focus on the customer experience forboth Allianz General (AGIC) and Allianz Life (ALIM) as a key differentiatorin a price-competitive environment. BUY on its market leadership, robustgrowth indicators and strong ESG credentials.

• AGIC – eyeing the EV market. Management thinks that a >5% growth ininsurance revenue is not likely to be repeated next year, given the high baseeffect and moderating new car sales. AGIC hopes to gain further marketshare among new EVs – at present, the company underwrites c.30% of allnew EV sales in Malaysia, vs c.40% of all new car sales. The company willalso be ramping up efforts to improve the customer experience, as well asexploring cross-selling opportunities in non-motor insurance products to itsmotor insurance customers. As at end-September, AGIC retained its poleposition in the domestic general insurance industry, with a 13.7% marketshare in 9M23 (9M22: 13.3%).

• ALIM – enhancing its agency force. The uptick in ALIM’s expense ratio(11.2% in 9M23 vs 9.6% in 9M22) was largely attributable to an increase inagency recruitment costs, as the company is looking to further strengthenits agency force. Agency annualised new premiums (ANP) grew by 21%YoY in 9M23, and was the biggest contributor to total ANP. We believe theexpense ratio could trend downwards over time as the investmentstranslate into higher ANPs and revenue. Separately, ALIM has alsoengaged in repricing activities to mitigate the impact of medical claimsinflation. It will also focus on improving the customer experience to providefurther differentiation from the rest of the market.

• Rahmah insurance – gateway for new business. Recall that YTD, ALLZhas launched five new rahmah insurance plans, catered towards the B40community and first-time insurance takers. On top of supporting theGovernment’s financial inclusion and insurance penetration initiatives, themove would also allow ALLZ to introduce its Rahmah customers to its fullsuite of life insurance and non-life insurance products further on. The focuson the customer experience – and consequently, customer loyalty – will bevital in this regard.

• FY23-25F forecasts higher by 2-3% after the results beat. We also raiseour target P/BV for AGIC to 1.2x (from 0.9x), given its continued robustperformance. The new P/BV, while still conservative, is closer to the P/BVsof recent M&A transactions in the domestic general insurance industry,which ranged 1.4-2.0x. Our SOP-derived TP rises to MYR21.10 (fromMYR18.70) and includes an unchanged 6% ESG premium – the highestamong the non-bank financial institutions under our coverage.

Source: RHB Securities Research - 27 Nov 2023