• Allianz Malaysia's (Allianz) 9M24 earnings growth moderated compared to 6M24 attributed to elevated claims, higher acquisition, and administrative expenses of its general business under AGIC and life business under ALIM. Slower GWP growth for AGIC and ALIM with a slowdown in ANP growth for life business. Also, new business value and CSM growth for the life business have moderated. Hence, we are downgrading our call from BUY to HOLD with a lower TP of RM22.20/share (previously: RM22.80/share) based on a revised SOP valuation after factoring in higher estimates for claims. No change to our neutral 3-star ESG rating.
• 9M24 core net profit within expectations, accounting for 70% of both our and consensus projection.
• Core net profit subdued at RM540mil (+0.5% YoY) for 9M24. Higher insurance revenue (+14.2% YoY) and net investment income (+62% YoY) were offset by increase in insurance services expenses (+22.2% YoY). 9M24 saw claims, acquisition and administrative expenses rose YoY. QoQ, net profit climbed by 9.7% to RM183mil in 3Q24 attributed to an increase in insurance service, net financial and investment results.
• Growth in GWP eased while claims stayed elevated in 3Q24. Growth in Allianz's GWP slipped to 11.5% YoY in 3Q24 from 12.1% YoY in 2Q24. This was driven by the slowdown in general insurance business GWP under AGIC to 14.2% YoY and life insurance business GWP under ALIM to 9.2% YoY in 3Q24. ANP for life business grew by 16.4% YoY in 9M24, vs the industry's 10.9% YoY growth. This was driven by growth from all distribution channels (agency, bancassurance and employee benefits). 9M24 claims of AGIC rose by 39.8% YoY due to higher claims from the fire and engineering class of business while claims for life business under ALIM rose by 12.5% YoY.
• Higher PBT from the life insurance segment was offset by weaker earnings from the general insurance business for 9M24. AGIC registered a lower PBT (after consolidation adjustment) of RM388mil (-4.2% YoY) in 9M24 due to increase in claims from fire and engineering large losses. In contrast, ALIM recorded improved profitability. PBT of ALIM rose 6.8% YoY to RM342mil in 9M24, contributed by higher insurance revenue from the release of CSM and increase in net investment income partially offset by rise in claims. Year-to-date, gross contractual service margin (CSM) of the life business grew 7.9% to RM3.5bil. The increase was supported by a new business value of RM374mil. RM359mil of CSM was released in 9M24.

  Allianz Malaysia 25 Nov 2024 AmInvestment Bank Bhd 2 Company profile Allianz commenced operations in Malaysia in 2001 by acquiring Malaysia British Assurance (MBA) Berhad and MBA Life Assurance Berhad from the Lion Group. Subsequently in 2007, the group took over Commerce Assurance Berhad (CAB), the property and casualty insurance arm of Bumiputra Commerce Holdings Berhad (BCHB). The acquisition of CAB entailed a 10-year (2007- 2017) bancassurance agreement with CIMB Bank Berhad (CIMB Bank). The banca partnership with CIMB Bank was subsequently terminated upon expiry of the contract in 2017. Allianz Malaysia Berhad (holding company) holds 100.0% in both Alliance General Insurance Company (Malaysia) Bhd (AGIC) and Alliance Life Insurance Malaysia Bhd (ALIM) operating the general and life insurance business respectively. Allianz General is one of the leading general insurers in Malaysia with a market share of 14.6%, ranking no.1. Allianz Life offers a comprehensive range of life and health insurance as well as investment-linked products with a strong ANP growth of 16.4% outpacing the industry's 10.9% leading to a market share of 10.8% as of 9M24. Investment thesis and catalysts We have downgraded the stock to HOLD from BUY with a revised TP of RM22.20/share. Dividend yield is decent at 5.3% for FY25F. However, earnings growth in the near term will be limited weighed down by higher claims, acquisition, administrative expenses and moderating GWP growth. Valuation methodology We are valuing Allianz Malaysia based on sum-of-parts valuation with 1.3x P/BV of AGIC's FY25F shareholders' funds and 1x the FY25F projected CSM for ALIM. Risk factors Downside risks to our estimates: i) Weaker than expected economic growth impacting growth in GWP, ii) Unexpected increase in claims impacting insurance service results and iii) High interest rates held for much longer in developed markets resulting in a lower valuation of bonds/securities portfolio, impacting investment income.

  Allianz Malaysia 25 Nov 2024 AmInvestment Bank Bhd 3

Source: AmInvest Research - 25 Nov 2024