KUALA LUMPUR: RHB Research has maintained its Buy call on Allianz with a target price of RM13.80, as it sees value in Allianz given that LI is maturing into an exponential phase of contribution.
"Recurring premium is now 80% of LI’s portfolio and new business margins will be anchored by bancassurance (past the initial phases of expense overrun) and ILB (better margins vs traditional)," it said in a note on Tuesday.
It said that Allianz General Insurance (AGIC )is still the largest local GI player (12.4% market share) with 8% FY14 gross premium growth vis-à-vis industry’s 5.9%, though it did not benefit much from lumpy insurance businesses (contractor’s all risks/foreign workers) that was believed to have boosted industry’s growth from 9M14’s 5.1%.
AGIC will retain its strategies to keep combined ratios consistently low and invest prudently in infrastructure to prepare for an industry detariffication by 2016, it said.
"We see new business opportunities (eg flood reconstruction activities) to partially offset weak retail sentiment and our expectations of heightened industry competition.
" Although we now factor the industry uncertainties for FY16F earnings, it will be able to absorb a slight margins erosion given its track record(FY15F/FY16F underwriting margins at 13%/12% respectively)," it noted.
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