Recovery of life insurance segment set to boost Allianz

PETALING JAYA: Analysts are mixed on Allianz Malaysia Bhd’s first quarter (Q1) ended March 31,2021 results which saw a 20% decline in earnings year-on-year (y-o-y) to RM63.26mil.

After stripping out a lumpy provision made by Allianz, Maybank IB Research said the company’s core earnings for Q1 were within expectation at 24% of its full year forecast.

“The variance of RM45mil to the reported net profit of RM63mil is a provision against potential payments to beneficiaries of policyholders that had passed away in the past many years but for which claims have yet to be made, ” it said in a report yesterday.

In addition, Maybank IB said Allianz Life’s earnings were also negatively impacted by the quarter-on-quarter (q-o-q) rise in bond yields which resulted in a fair value loss of about RM63mil including tax impact of RM13mil.

“The decline in earnings as a result of fair value losses has largely been anticipated, which is why we have imputed a y-o-y decline in FY21 group earnings, ” it added.

On the other hand, AmInvestment Bank Research pointed out that Allianz Q1 of financial year 2021 (FY21) was below expectations, making up only 11% of its and 12.2% of consensus estimates.

It said that the quarter was impacted by the US Treasury yield that had impacted its life insurance segment.

Moving into the year, the research house expects that Allianz could see earnings improvement on the recovery of the life insurance segment.

“We expect earnings to improve in the quarters ahead as the surge in MGS yields following the steeper US Treasury yield curve that impacted the fair value of the life business segment in Q1FY21 is unlikely to recur in the near term.”

Meanwhile, RHB Research said Allianz’s results were “largely in line, despite the headline weakness”.

It said the insurer’s core profit before tax during the quarter grew 12.4% y-o-y to RM130.7mil, largely on its strong general insurance performance.

“The headline weakness was mostly due to unfavourable interest rates, which resulted in substantial fair value losses in Q1FY21, which we deem as non-core, ” it said.

The research house has kept its “buy” call on Allianz at RM18.20.

Shares in Allianz closed slightly lower at RM13.04 per share in line with the overall weakness in the broader market.

Meanwhile, Maybank IB said Allianz’s general insurance segment saw its pretax profit jump 24% y-o-y primarily on the back of lower claims.

Motor and fire premiums rose at a decent pace of 7% and 12% y-o-y, respectively.

“Q1FY20 saw lumpy claims and claims have remained relatively low since then, with fewer cars on the road amid the MCO.

“Allianz Life saw its new business premiums (NBP) jump 39% y-o-y in Q1FY21, partly because of a low base in Q1FY20, whereby MCO 1.0 had impacted NBP from March 2020, ” it said.

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