TA Securities retains overweight on insurance sector

KUALA LUMPUR: TA Securities has maintained an “overweight” stance on the insurance sector.

“We expect gross written premium (GWP) to grow by circa-5-10% in 2022 on the back of higher car sales, rebound in travel protection, and higher life insurance sales.

“Reiterate our ‘buy’ calls on Allianz (TP: RM15.48) and Tune Protect (TP: RM0.51),” it said in a report.

Valuation-wise, TA Securities said Allianz and Tune Protect were currently trading at CY22 P/B of 0.5x, which is cheap compared to historical M&As in the insurance sector that ranged from 1.4 to 2 times.

Meanwhile, Allianz and Tune Protect dividend yields are at 5.0% and 3.1%, respectively, for CY22.

According to the General Insurance Association of Malaysia, the industry is potentially facing upwards of RM2bil-RM3bil in total flood-related claims exposure.

“Positively, net estimated flood claim exposure on Allianz and Tune Protect is expected to be lower than RM50mil and RM2.5mil due to reinsurance and the natural catastrophe treaty.

“Separately, we believe that the take-up rate for flood coverage will improve and do not expect insurance companies to increase flood coverage prices in the short term,” TA Securities said.

The research house said for Allianz, the motor and fire business accounts for 63.7% and 15.3% of its general business portfolio.

Despite motor accounting for a much more significant percentage of its portfolio, TA Securities understands that impact was more extensive for the commercial business, mostly from factories in industrial areas like Shah Alam and Klang.

“Given that Allianz's market share for the general business stood at around 13.1% as of 9M21, we estimate that the gross impact is circa-RM300mil (versus the estimated RM2bil-RM3bil PIAM has for the general insurance industry).

“Positively, the net estimated claim exposure is below RM50mil, mainly due to reinsurance and the natural catastrophe treaty,” it said.

As for Tune Protect, 17% of its GWP comes from the motor business, while fire accounts for 19%. The estimated net impact from the flood claims exposure is expected to be below RM2.5mil.

“Overall, we do not expect any major earnings erosion on Allianz and Tune Protect from the recent floods due to reinsurance and the natural catastrophe treaty.

“We project Allianz and Tune Protect FY21 combined ratio to increase by 0.6 percentage point and 0.8 percentage point to 88.8% and 94.7%, respectively (versus 9MFY21: 88.2% and 93.9%),” TA said.

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Insurance , Allianz Malaysia , Tune Protect


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