FY11 earnings came in within expectations, accounting for
96.1% of our estimates largely due to higher gross earned premium and net
investment income. Despite the strong competition and economic uncertainty, it
was able to retain its leading position in the general insurance industry,
which reinforces our view that the company will remain profitable as it forges
ahead. However, we are trimming our earnings forecast by 8.6% in anticipation
of more MMIP losses and a slower 2012, but our FV is raised to RM6.97 as we roll-over our valuations to FY12. BUY.
In line despite MMIP
losses. Allianz recorded earnings
that were within our expectations, accounting for 96.1% of our estimates,
despite its share of loss which amounted to RM10.0m arising from the Malaysian
Motor Insurance Pool (MMIP) in 4QFY11. Both revenue and core net profit surged
by 9.7% and 18.1% y-o-y respectively, largely due to higher gross earned
premium (+8.4% y-o-y) and net investment income which increased 18.2% y-o-y,
buoyed by stronger coupon interest income (+25.6% y-oy) and dividend income
(+40.1% y-o-y). The increase in gross earned premium was mainly contributed by
its life insurance operations which expanded by 11.1% y-o-y and this was largely due to the premium growth from the agency distribution channel. Investment
income was also mainly driven by the higher contribution from life insurance operations
which surged by 28.9% y-o-y due to a higher investment asset base. The overall claims ratio remained steady at
62.8% compared to 62.9% in the previous year.
General insurance. The higher PBT (+8.1% y-o-y) for its general
insurance business was mainly underpinned by stronger gross written premium
(+10.5% y-o-y), underwriting result (+20% y-o-y) and lower management
expenses (FY11: 17.0% vs FY10: 18.4%), though
the group recorded a slight dip in its net investment income for this segment (-5.2%
y-o-y). The group’s general insurance portfolio mix remained healthy, with
motor and non-motor segments making up 52% and 48% of the total portfolio.
Life insurance. Surplus before tax surged 9.9% y-o-y on the back
of higher gross written premium
(+11.1% y-o-y) and stronger investment income (+18.5% y-o-y, due to realized
gains from the disposal of equities-linked securities). Surplus transfer from
life fund to shareholders’ fund increased by 20% y-o-y to RM18m, slightly below
our estimate of RM19.0m.
Maintain BUY with
higher FV of RM6.97. In anticipation of more potential losses from MMIP and
a slower FY12, we are lowering our FY12 earnings forecast by 8.6%. Nonetheless,
our fair value is raised from RM6.60 to RM6.97 as we rollover our valuations to
FY12 based on the industry average PER of 15x for its general insurance and
P/EV of 1x on an embedded value (EV) of RM580m for its life insurance.
Source: OSK188
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