• Keep BUY, new MYR21.70 from MYR21.10, 17% upside and c.6% FY24F yield. FY23 results were a beat on stronger contributions from Allianz General (AGIC) and Allianz Life (ALIM). While FY24 should be a moderation year for AGIC, given a slowdown in car sales, we think this will be offset by a stronger showing from ALIM on its promising contractual service margin (CSM) indicators. As such, we think Allianz Malaysia is poised to maintain its resilience in what should be a challenging year for the insurance industry.

• Group results review. 4Q23 net profit of MYR194m (+12% YoY, -2% QoQ) lifted FY23 earnings to MYR731m (+19% YoY), beating our and Street’s full- year forecasts. The main deviation from our numbers stemmed from lower- than-expected tax expenses, as we had assumed a higher effective tax rate for ALIM. FY23 saw the group record 12% growth in insurance revenue, though underwriting margins shed 1.5ppts to 16.5% on the back of higher insurance service expenses (+16%). Investment income (+88%) was the key profit driver during the year, ensuring a commendable PBT growth of 10%. The announcement of a 69 sen DPS – likely the final one for FY23 – brings the full-year DPS to 100.5 sen, i.e. a 24% payout.

• AGIC – another solid quarter. The general insurance segment’s revenue grew 8% YoY in FY23, mainly due to greater motor insurance sales. While topline growth was outpaced by that of insurance and reinsurance expenses (+9% and +13%), stronger performances on the investment front (+21%) ensured a decent segmental PBT growth of 8%. Moving forward, a slowdown in car sales in FY24 (RHB 2024F TIV growth: -22% YoY) could cause revenue growth to slow down, though a tapering off of commercial-related reinsurance expenses should mitigate the bottomline impact.

• ALIM – CSM indicators are promising. ALIM’s performance in 4Q23 was sequentially weaker, owing to softer insurance revenue (-5%) and higher claims incurred (+20%). However, the segment recorded MYR165m in new business value in 4Q23 (3Q23: MYR132m), resulting in a 3% QoQ growth in the CSM end balance (YoY: +11%). Elsewhere, the segment’s focus on driving agency productivity appears to be bearing fruit – agency market share added 1ppt YoY to 11.3%, while agency annualised new premiums growth outpaced that of the industry. All in, we think the strong sales momentum can be sustained, and ongoing repricing activities to hedge against higher claims point towards a stronger FY24 for both the segment’s topline and the bottomline.

• Forecasts and TP. We raise FY24F and FY25F earnings by 4-5% after imputing the latest full-year financials and adjusting our CSM estimates. This is partly offset by softer growth assumptions for AGIC, as we do not expect the strong car sales in FY23 to continue. All in, our TP is raised to MYR21.70 and includes a 6% ESG premium based on ALLZ’s 3.3 ESG score vs the 3.0 country median.

Source: RHB Research - 27 Feb 2024