by ANIS HAZIM / pic by TMR FILE
AMINVESTMENT Bank Bhd (AmInvest) maintained its ‘Buy’ call on Allianz Malaysia Bhd despite the group recording a lower core net profit by 16.2% quarter-on-quarter (QoQ) to RM152 million in 3Q21.
AmInvest analyst Kelvin Ong kept an unchanged fair value (FV) of RM17.70 per share on the insurer based on a sum of parts valuation and made no changes to his earnings estimates.
“The stock remains deeply undervalued based on a price-to-book value of 0.5 times for the financial year of 2022 (FY22),” Ong said in a note last week.
The analyst noted that Allianz’s lower net profit in the quarter was attributable to a decline in net earned premium and lower FV gains of RM29 million versus RM49 million in 2Q21.
“Its yield movements for the ten-year Malaysian Government Securities climbed by 10 basis
points QoQ to 3.5% in 3Q21. This has resulted in FV losses on investments for its life business under Allianz Life Insurance Malaysia (ALIM),” he stated.
For the cumulative nine-month period (9M21), Allianz posted a net profit of RM439 million (16.6% year-on-year [YoY]) after stripping out provisions for potential claims from beneficiaries of deceased policyholders based on the listing by the National Registration Department totalling RM62 million.
“For 9M21 core earnings, we have also excluded the conservative provisions taken for Covid-19 mortality of RM89 million in total,” he said.
The group’s 9M21 core earnings are also within AmInvest’s expectation, making up 76.6% of the estimate and exceeding consensus projection up to 89% of the street forecast.
Allianz’s operating revenue grew by 7.7% YoY for 9M21 supported by higher gross earned premium and investment income. Its gross written premiums (GWP) growth slowed down in 3Q21 and slipped to 4.3% YoY in 9M21 compared to 8.6% YoY in 6M21.
“We believe this was due to the lockdowns imposed to manage the new wave of Covid-19. Selling activities of its general and life insurance business were impacted in the quarter,” he noted.
Allianz General Insurance Company Malaysia (AGIC)’s GWP also contracted by 0.6% YoY attributed to the slowdown in motor insurance.
According to the analyst, AGIC’s GWP contributed 6.5% in 9M21 for its partnership with Pos Malaysia Bhd compared to 7.4% in 9M20.
Nevertheless, the market share for the general insurance business remained robust at 13.1%.
Allianz’s annualised new business premium (ANP) for life business grew by 32.6% YoY for 9M21, contributed in part by the lower base in 2020.
“It surpassed the life insurance industry’s 14.5% YoY growth,” the analyst added.
At the same time, its new business value for its life business expanded 28.1% YoY to RM212.5 million for 9M21.
“ANP growth for life business is envisaged to gradually increase the embedded value of ALIM,” the analyst wrote.
The analyst foresees that the easing of mobility restrictions and reopening of the economy is poised to improve Allianz’s premium growth in 4Q21.
“This is in view of the lesser challenge for selling activities after lockdown measures have been eased,” he further said.