KUALA LUMPUR: Maybank Investment Bank has maintained its “buy” call on Allianz Malaysia Bhd with a higher sum-of-parts (SOP) target price of RM14.05 to reflect Allianz Life’s embedded value.

“Our new SOP reflects Allianz Life’s embedded value of RM1.6b end-Dec 2016 (previously MYR1.3bil on end-Mar 2016 base) and updates Allianz General’s (AG) book value to end June 2016 (latest available results; from end-Dec 2015), while maintaining unchanged target multiples of 0.9 times and 2.0 times respectively. 

“Allianz offers an exposure to the largest general insurer in Malaysia and one of the fastest growing life insurers. Maintain nuy with a 25% upside,” Maybank said in a report. 

The research house said Allianz’s 4Q16 net profit of RM90mil took 2016 net profit to RM312mil, in line at 103% of Maybank’s full-year forecast and the QoQ growth was aided primarily by lower actuarial reserving at Allianz Life, given the spike in bond yields in 4Q16. 

The operating environment was challenging for Allianz General amid contracting industry car sales. 

Maybank said net earned premiums rose a marginal 2% year-on-year in 2016, while pretax profit slipped 1%. 

Positively, it added that Allianz Life buffered the decline with a steady 9% year-on-year increase in net earned premiums and a 19% year-on-year surge in pretax profit. Allianz General accounted for 70% of group pretax profit. 

Maybank noted that the Malaysia Competition Commission has proposed to fine all the 21 general insurers in Malaysia under Persatuan Insurans Am Malaysia (PIAM) for the alleged fixing with panel workshops, of trade discount rates for parts of certain vehicle makes and labour hourly rates. 

“The proposed financial penalty is RM213m of which Allianz General’s portion is RM27.5mil (determined according to market share) or 8% of our projected FY17 group net profit. 

“This is a contingent liability but to note that the fine is a mere proposal at this stage,” it said.

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