Allianz’s FY12 core earnings were in line, representing 101.6% and 97.9% of our and consensus estimates respectively, buoyed by premiums growth of 14.4% and 14.5% in its GI and LI businesses. Including the recognition of a RM51.1m non-par fund surplus as earnings, Allianz’s ROE surged to 13.1%, higher than FY10 and beating its 12% target. The company declared a dividend of 6.5 sen. We lift our FY13 core earnings forecast by 7.7% and introduce our FY14 forecast. Maintain NEUTRAL, with FV at RM8.02.
In line. Allianz’s FY12 core earnings of RM203.4m were in line, representing 101.6% and 97.9% of our and consensus estimates respectively. Note that this excludes a one-off reversal of over-provision tax from FY11 amounting to about RM4.2m, which if included, would have boosted Allianz's earnings to RM207.6m. The gross premiums growth in its general insurance (GI) and life insurance (LI) segments came in at 14.4% and 14.5% y-o-y respectively, exceeding the growth figures for FY11.
ROE ticks up to 13.1%. Allianz’s 13.1% ROE, excluding the non-participating surplus fund, was higher than FY10, beating its target for 12%. This was partially attributed to the recognition of a life non-participating surplus as earnings amounting to RM51.1m (vs
RM43.9m in FY11). If the non-par surplus fund was accounted for, its ROE would have stood at 10.7%. We note that the company's actuary-recommended surplus transfer from the life non-par fund to its shareholders’ funds for FY12 was a lower RM8.4m vs the RM18m recorded in FY11. Hence, Allianz may need to retain a larger surplus for its business expansion plans.
Changes in our forecasts. As part of our in-house streamlining of coverage, we are revamping our model and are incorporating the portion of earnings recognized from the non-participating surplus as part of our core net profit assumption. That said, we are revising upwards our FY13 core earnings by 7.7% and introducing our forecasts for FY14. The company will hold a results briefing today. The stock’s potential share re-rating catalysts are more clarity on new growth drivers rising from the utilization of bancassurance channels as well as the potential roll-out of new products.
ROE rises to 13.1%. Allianz’s ROE at 13.1%, excluding the non-participating surplus fund, was higher than FY10, exceeding its target for 12%. This was partially attributed to the recognition of a life non-participating surplus amounting to RM51.1m as earnings vs RM43.9m in FY11. However, we note that the company had lowered the surplus transfer from its life non-par fund to its shareholders’ funds for FY12 as recommended by its appointed actuary (FY12: RM8.4m vs RM18m for FY11). Including in the non-par surplus fund, Allianz’s ROE would have come in at 10.7%. Hence, the company may need to retain a bigger surplus to support its business expansion. In December 2012, the company entered into a RM54.3m five-year loan facility with Allianz SE to fund its expansion plans, including the cost of a region-wide bancassurance agreement with HSBC.
Dividend of 6.5 sen. Allianz has announced a final DPS of 6.5 sen as well as a preference share dividend (ICPS) of 7.8 sen per ICPS. The dividend yield, based on the current share price, is <1%.
Spectacular showing from general insurance. Allianz’s GI division recorded an impressive 22.9% jump in underwriting profit and a 14.0% increase in net investment income. Its overall combined ratio improved 2.0ppts to 87.7% y-o-y, mainly due to a controlled claims ratio, which improved by 3.5ppts, and an improvement in the commission ratio by 1.2ppts. This was, however, partially offset by the rise in its management expenses ratio by 2.7ppts to 19.7%. We believe the motor quota-sharing agreement had been effective in boosting premiums growth to above-industry levels given that the motor segment still comprises the largest portion of Allianz General's business at 54% of the company’s current portfolio. GI’s investment performance was largely intact, with a pure investment yield of 3.8%. Allianz General had allocated a higher portion of investments into fixed-income instruments, as evidenced by the 59.0% of its investment portfolio having been allocated for government bonds, 34.0% for corporate bonds and the remaining 7% for deposits.
Dividend of 6.5 sen. Allianz has announced a final DPS of 6.5 sen as well as a preference share dividend (ICPS) of 7.8 sen per ICPS. The dividend yield, based on the current share price, is <1%.
Spectacular showing from general insurance. Allianz’s GI division recorded an impressive 22.9% jump in underwriting profit and a 14.0% increase in net investment income. Its overall combined ratio improved 2.0ppts to 87.7% y-o-y, mainly due to a controlled claims ratio, which improved by 3.5ppts, and an improvement in the commission ratio by 1.2ppts. This was, however, partially offset by the rise in its management expenses ratio by 2.7ppts to 19.7%. We believe the motor quota-sharing agreement had been effective in boosting premiums growth to above-industry levels given that the motor segment still comprises the largest portion of Allianz General's business at 54% of the company’s current portfolio. GI’s investment performance was largely intact, with a pure investment yield of 3.8%. Allianz General had allocated a higher portion of investments into fixed-income instruments, as evidenced by the 59.0% of its investment portfolio having been allocated for government bonds, 34.0% for corporate bonds and the remaining 7% for deposits.
Life insurance posts robust new business sales in 4Q. Allianz’s 14.4% LI premiums growth was bolstered by a strong growth of 11.8% in annualized new premiums (ANP). This growth far exceeds the mere 2.2% growth in the life insurance industry’s total new business as reported by Life Insurance Association of Malaysia (LIAM). We noted that 4Q alone saw ANP come in at an impressive RM103.2m vs an average of RM64m in the preceding three quarters and MYR66m average in FY11's financial quarters. Once again, its agents were the main driving force for the new business, contributing as much as 94.1% to ANP.
4Q ANP of traditional products rise. That said, the ANP contributed by agents alone grew as much as 13% y-o-y. However, we were surprised to see that part of the boost in 4Q's new business came from traditional products, which at RM59m was more than twice the average ANP of RM30m in the preceding quarters. New business from the investment-linked (IL) segment contributed by agents was also boosted to RM40.2m, although the increase was less pronounced than that for traditional products. Given the performance of its traditional products’ sales by its agents, we believe Allianz Life may have been well-prepared to equip its agents with the necessary skills and is on its path to fully roll out potential new products and capture segments catered to savings and retirement needs by mid-2013.
Changes to our forecasts. As part of our internal streamlining, we are revamping our model and now include the earnings recognized from the non-participating surplus into our core net profit assumption. That said, we are lifting our FY13 core earnings by 7.7% and introduce our FY14 forecasts. The company will hold a results briefing today. The stock’s potential share re-rating catalysts are more clarity on new growth drivers from the utilization of bancassurance channels, as well as the rollout of new products.
4Q ANP of traditional products rise. That said, the ANP contributed by agents alone grew as much as 13% y-o-y. However, we were surprised to see that part of the boost in 4Q's new business came from traditional products, which at RM59m was more than twice the average ANP of RM30m in the preceding quarters. New business from the investment-linked (IL) segment contributed by agents was also boosted to RM40.2m, although the increase was less pronounced than that for traditional products. Given the performance of its traditional products’ sales by its agents, we believe Allianz Life may have been well-prepared to equip its agents with the necessary skills and is on its path to fully roll out potential new products and capture segments catered to savings and retirement needs by mid-2013.
Changes to our forecasts. As part of our internal streamlining, we are revamping our model and now include the earnings recognized from the non-participating surplus into our core net profit assumption. That said, we are lifting our FY13 core earnings by 7.7% and introduce our FY14 forecasts. The company will hold a results briefing today. The stock’s potential share re-rating catalysts are more clarity on new growth drivers from the utilization of bancassurance channels, as well as the rollout of new products.
Source: OSK
ReplyDeleteThe purpose of this type of insurance is to provide the child with future life insurance cover. However, if the child dies before attaining the vesting age, the sum insured of the policy is not payable. Only the premiums paid (with or without interest, depending on the company's policy) are refunded. Should the child die after the vesting age, the full sum assured will be paid.
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