Keep BUY and MYR18.70 TP, 5% upside and c.6% FY24F yield. Allianz Malaysia’s results outperformed estimates, with strong contributions from Allianz General (AGIC) and Allianz Life Insurance Malaysia (ALIM). While the upside to our TP has narrowed after a recent share price rally, a stable claims ratio and good growth in the contractual service margin (CSM) provide reasons for us to stay upbeat on the stock. We maintain our forecasts and TP for now, pending the group’s results briefing later today.

Group results review. ALLZ’s 3Q23 net profit of MYR197.9m (+42% YoY, +19% QoQ) brought the 9M23 figure to MYR537.2m (+22% YoY), which forms 81% of our full-year projection. Insurance revenue continued its strong momentum, up 11% YoY. Insurance service results, however, ticked up by just 3% YoY from higher claims (+12% YoY) and directly attributable expenses (+14% YoY). A strong showing from investment income (>100% YoY) led to a PBT growth of 14%. No dividends were declared during the quarter.

AGIC – steady as she goes. AGIC continued to perform well in 9M23 – insurance revenue growth of 8% YoY surpassed insurance service expenses growth of 1% YoY. The claims ratio eased to 48% (9M22: 52%) as the claims experience (+2% YoY) was outpaced by revenue growth. While net reinsurance costs surged by 72% YoY, bottomline prospects were further lifted by investment returns being 29% YoY higher. All in, the segmental PBT of MYR405m for 9M23 pointed to a 19% YoY growth.

ALIM – a stellar quarter. ALIM booked in solid 3Q23 numbers – insurance revenue growth of 29% YoY (+20% QoQ), an improved underwriting margin of 16% (2Q23: 13%, 3Q22: 13%), and superb investment returns (+>100% YoY, +91% QoQ). Overall, segment PBT of MYR125m (+39% YoY, +26% QoQ) in 3Q23 was a welcome rebound from two consecutive quarters of <MYR100m PBT, and brought 9M23 PBT to MYR320m – a 4% YoY increase.

An improving outlook on Life. ALIM recorded a 31% YoY increase in new business value (+33% QoQ) in 3Q23, pushing the CSM higher by 11% YoY (+5% QoQ). The CSM has grown by 8% YTD (10% annualised), and the end- 3Q CSM balance of MYR3.2bn has already surpassed our year-end forecast. While we make no changes to our assumptions for now, we see further upside to our forecasts, given the strong CSM-related numbers.

Forecasts and TP are maintained for now, pending ALLZ’s results briefing later today. While a 12% increase in its share price over the past month has narrowed the upside to our TP, there remains scope for us to raise our forecasts – and consequently, our TP – given the results beat. Our TP of MYR18.70 is derived from an SOP valuation and includes a 6% ESG premium, per our in-house proprietary scoring methodology.

Source: RHB Securities Research - 24 Nov 2023