General Business Outperformed the Industry

Excluding premium contribution from the Perlindungan Tenang Programme of about RM65mn, Allianz general business gross written premium (GWP) grew 13.1% to RM3.0bn (vs. industry growth of 7.8%) in FY23, on the back of higher premium stemming from motor business (+18.8% YoY).Coupled with higher investment income of RM37.4mn, general business PBT has increased 7.9% to RM556.2mn. Overall, Allianz’s market share grew to 14.0% (vs. 13.3% in FY22).

Into year 2024, we expect Allianz’s general business GWP to grow by 6.3%, driven by: i) recruitment of second-hand car dealers, ii) commercial business, iii) repricing activities and iv) higher market share (currently c.30%) in the EV segment. Meanwhile, we believe that Allianz combined ratio will remain resilient at 86.2% in FY24 (vs. 85.7% in FY23), better than industry levels by at least 3 pts.

Life Business Growth Intact

Allianz’s FY23 life business annualised new premiums surged by 14.6%, surpassed industry growth of 11.1%, boosting Allianz market share to 9.8% (vs. 9.5% in FY22).We gathered that the commendable performance was attributed to growth in agency (+17.9%), bancassurance (+5.2%) and employee benefits (+22.5%), backed by marketing initiatives such as free sum assured and loyalty bonus. In addition, total new recruits headcount has increased 56.0% YoY to 1,984 recruits.

Moving forward, we believe that 1Q24 bancassurance and agency business will report a strong growth number amid employee renewals and intensified agency recruitment. In all, management alluded that the life business will continue to grow via: i) repricing of c.30% of its portfolio, ii) resilient block persistency ratio (c. 84.8% in FY23), iii) cost discipline and iv) expansion of agency force and productivity.

Regional Delivery Centre in KL

To recap, Allianz Asia Pacific (AZAP) launched its Regional Delivery Centre (RDC) based in Kuala Lumpur back in October 2023. With the RDC, AZAP will transform its IT services and capabilities into a standardised operating model to deliver best-in class customer experience, accelerate innovation and outperform competition. We believe that the setup of RDC will allow Allianz Malaysia to consolidate best practices, increase its customer-centricity and ensure a richer end-to-end customer experience. Management added that cost impact is neutral over the short term, but expect savings in the long-run. All in all, we believe that Allianz growth momentum is intact in 2024. At current share price, dividend remains decent at 6.8% for FY24.

Impact

We raised FY24/25 earnings estimates to RM771.9/801.2mn from RM738.1/764.4mn after increasing our life insurance GWP by 3.8%.

Valuation

We reiterate our Buy recommendation on Allianz with a TP of RM20.38/share based on SOP valuation.

Source: TA Research - 28 Feb 2024