• Maintain NEUTRAL and MYR21.70 TP, 7% upside with c.6% FY25F yield. Allianz Malaysia’s 1H24 results are in line with our and Street expectations. Both the general and life insurance segments posted strong revenue and investment return gains YoY, but elevated claims continued to weigh on their bottomlines. Our NEUTRAL call is premised on a moderation in earnings growth in FY24F which, at the halfway point, is materialising nicely.

• Group results review. 2Q24 net profit of MYR167.0m (flat YoY, -12% QoQ) brought the 1H24 sum to MYR356.8m (+5.2%), coming in within our and Street full-year expectations. Group insurance revenue surged 16% YoY after stronger contributions from both the Allianz General (AGIC) and Allianz Life Insurance Malaysia (ALIM) businesses, but the underwriting margin eroded to 15% (1H24: 18%) from higher claims and acquisition expenses incurred. This, however, was offset by significantly higher investment returns (doubled YoY). QoQ, the underwriting margin was again impacted by still elevated claims, but mitigated by net reinsurance income of MYR24m (1Q24: net expense of MYR75m, 2Q23: net expense of MYR62m). Marked-to- market gains also fell by 23% QoQ (YoY: >4x higher), leading to the decline in bottomline.

• AGIC: Impacted by higher claims. This segment posted insurance revenue growth of 16% YoY in 1H24, driven by higher premiums underwritten for motor insurance. However, claims remained elevated, growing 52% YoY. We understand this was largely a result of large-ticket claims from the fire and engineering segments. As a result, the segment’s insurance service results slid 11% YoY, although an improved investment performance (+12% YoY) ensured the impact to its bottomline was cushioned, as segment PBT declined by a smaller 6% YoY.

• ALIM: Showing continued momentum. ALIM recorded insurance revenue growth of 17% YoY in 1H24, supported by annualised new premiums (ANP) growth of 39%. This could be the positive result of the group’s initiatives towards uplifting agency productivity, which has led to a 22% YoY increase in acquisition costs. Elsewhere, continued growth in the contractual service margin (+15% YoY) alongside a resounding performance on its investments (more than doubled YoY) are other key takeaways from the segment’s results. The segment posted a PBT of MYR229m in 1H24, up 18% YoY.

• We make no changes to our forecasts pending ALLZ’s analyst briefing later today. Our SOP-derived TP remains at MYR21.70, and includes an unchanged 6% ESG premium, based on our in-house proprietary ESG scoring methodology.

Source: RHB Research - 26 Aug 2024