• Keep BUY and SOP-based MYR17.90 TP, 42% upside and c.3% yield. 1Q22 earnings were in line with our FY22F estimates, but missed Street’s. Gross written premium (GWP) growth for both the general insurance and life insurance segments was healthy despite some weakness in the latter’s annualised new premiums (ANP) – however, still leading the industry. We understand that Allianz Malaysia plans to strengthen its agency distribution channel for ALIM, while remaining focused on higher margin investment-linked products.

• In line with our estimates. ALLZ recorded headline PATAMI of MYR101.3m (-34% QoQ, +60% YoY). The QoQ weakness was largely due to fair value losses amounting to MYR146.3m (vs 4Q21 fair value losses of MYR93.9m), and higher tax expenses of MYR50.5m (vs 4Q21’s MYR38.4m) due to maiden recognition of the Cukai Makmur. Despite that, group core PBT was 41% higher YoY at MYR184.8m (-5.6% QoQ), mostly on the strong performance of its life insurance arm.

• Allianz General Insurance (AGIC). GWP rose 12% YoY in 1Q22, outperforming the general insurance industry’s 6.5% YoY, largely driven by strong growth in its agency channel (60.5% of total distribution vs 1Q21: 57.6%), mainly from the personal accident and motor business. Segmental PBT grew 10.4% YoY from higher underwriting profit, but, still short of 4Q21’s, which led to a 10.7% QoQ decline. Claims ratio ticked up 5.2ppts QoQ to 57.6% (1Q21: 59.8%) – higher than the industry’s 51.9%.

• Allianz Life Insurance Malaysia (ALIM). 1Q22 ANP declined 14.1% (vs industry’s decline of 15.7%). The ANP decline stemmed from the agency distribution channel (-27% YoY). GWP grew 7.7% YoY (+0.8% QoQ), driven by higher sales for single-premium products (+8.5% YoY, +35% QoQ). Segmental PBT of MYR67.7m was down 23% QoQ (vs 1Q21’s loss of MYR20m), due to higher fair value losses recorded vs 4Q21. That said, core PBT (Figure 2) grew 10.8% QoQ to MYR100.7m (+134% YoY).

• We make no changes to our key assumptions and TP, as the results were in line with our expectations. We did not take into account the impact of the Malaysian Financial Reporting Standards 17 or MFRS 17 in our forecasts at this juncture. Our MYR17.90 TP incorporates a 4% premium to our intrinsic value for its ESG score of 3.20, based on our in-house proprietary methodology.

Source: RHB Research - 23 May 2022