6M23: Boosted by General Insurance Segment

To recap, Allianz reported decent 6M23 results with a higher insurance revenue and net profit of 8.4% and 12.9% YoY to RM2.3bn and RM455.2mn respectively. The better performance was attributed to: i) higher PBT of RM263.8mn (+17.9% YoY) from general insurance segment and ii) discontinuation of Cukai Makmur (tax rate: -4.3 pts YoY). The general business was lifted by positive fair value movement from investment and higher insurance service results from the motor and commercial business.

However, the life business PBT reduced to RM195.2mn (vs. RM217.8mn in 6M22) due to normalised claims experience from investment-linked protection business and weaker agency annualised new premiums (-2% YoY).

General Business Strategy remains Intact

Excluding the discontinued Perlindungan Tenang Voucher incentive (GWP at RM58mn in 6M22), Allianz general segment GWP grew at 12.0% in 6M23, higher than the industry growth of 8.0%. Besides that, we gather that Allianz managed to capture market share in the motor industry to 20.5% in 6M23 (vs. 19.1% in 6M22).

Moving forward, management targets to increase market share further via: i) new car manufacturers such as BYD, ii) recruitment of second-hand car dealers and iii) commercial business. Note that historically, Allianz has moved away from second-hand cars as the value was not optimal. However, it believes the levels of profitability of second-hand cars are now within its risk appetite, given that the second-hand car market value had gone up. As far as the Phase 2B liberalisation is concerned, we understand that Allianz is waiting for BNM approval. We believe Allianz will benefit as the group will leverage on its market leader position.

Agency ANP will be Stronger in 2H23

Allianz life business market share decreased to 9.3% in 6M23 as compared to 9.4% in 6M22 while new business value decreased by 2.6% to RM147.3mn due to an increase in acquisition expenses (investment in agency such as CEO programme). As such, we expect the life business expense ratio to increase to 11.2% in FY23 (vs. 9.2% in FY22).

Meanwhile, Allianz investment-linked market share grew to 9.5% from 8.7% in 6M22 as management continues to focus on protection business. Into 2H23, management will continue to focus on repricing activities, cost containment initiatives and monitor potential overtreatment by doctors. We are confident that total agency ANP annualised new premiums will show strong growth in 3Q23, driven by: i) investment-linked business via giving some free sum assured to customers who purchase large sum, ii) cash back campaigns and iii) agent recognition.

Impact

We raised FY23/24/25 earnings by 1.5/1.6/1.7% after increasing our Allianz market share in motor insurance by 1 pp.

Valuation

Following the revision in earnings, we raised Allianz TP to RM17.42/share (previously RM17.40/share). Maintain Buy on the stock based on SOP valuation.

Source: TA Research - 28 Aug 2023