Review

The insurance sector reported a resilient set of 1Q24 results, with results within expectations. Combined, the 1Q24 net profit for insurance companies under our coverage increased by 6.6% YoY to RM186.3mn.

Allianz’s 1Q24 net profit rose to RM189.8mn from RM172.7mn in 1Q23, boosted by higher profit contributions from the life insurance segment. The life insurance business posted a higher PBT of 26.7%, but the general business PBT declined 5.4% due to extraordinarily low claims in 1Q23 and lower fair value gain of investment assets.

As for Tune Protect, the group posted a core net loss of RM3.5mn in 1Q24 (vs a profit of RM2.0mn in 1Q23) due to a higher combined ratio of 14.5 pts to 109.8%.

Outlook

We expect the general industry gross written premium to grow by 8% in 2024 (vs. 7.8% in 2023), driven by higher premiums stemming from motor, commercial and personal accident and health segment. We foresee headwinds coming from the lower TIV moving forward as some consumers might hold back car purchases following the reduction of fuel subsidy announcements. Note that the general industry GWP rose by 13.7% in 1Q24. Meanwhile, the life industry is expected to remain robust (1Q24 ANP increased by 22.4% YoY) on the back of the strong performance of group policies and investment-linked policies.

As for the travel segment, we expect the travel business to improve further. Recall that international travel ended 2023 at 88% of pre-pandemic levels and is expected to surpass pre-Covid level in 2024. We believe Tune Protect will benefit as airlines continue adding capacity to the market.

Recommendation

In this reporting season, we have downgraded Allianz (TP: RM23.27) to Hold, mainly due to a strong run in share price. With that, we downgraded the sector to neutral from overweight. We have Buy recommendations on Tune Protect (TP: RM0.48) as we believe the group will turn around in 2H24.

Source: TA Research - 5 Jun 2024