Allianz Malaysia prepared for new normal as July 1 looms
KUALA LUMPUR: Allianz Malaysia Bhd (Allianz) is proactively laying the foundations for the new normal as the industry prepares for a detariffication of motor and fire insurances by July 1.
Thus, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) said forecasts have already factored in the potential for increased rate competition.
From July 2017 onwards, premium rates for Motor Comprehensive and Motor Third Party Fire and Theft will be market driven. However, premiums for third party motor and fire insurance will continue to be regulated with gradual adjustments.
“While competition will likely heat up, insurers can now employ risk-based pricing while bundling productsto improve overall premiums,” it said in a note.
“As such, while motor premiums may decline, the impact may not be large, especially since any variance of more than 10 per cent in motor product pricing will require Bank Negara Malaysia's (BNM) approval.”
Maybank IB Research said how detariffication affects the industry landscape remains to be seen, but cited the lack of evidence of any significant price competition at this point in time.
“Pricing aside, Allianz hopes to compete on the efficiency of product delivery as well as service quality, with greater emphasis on its digital platforms to further enhance its client experience,” the research arm said.
The research arm has conservatively assumed a contraction in Allianz General's gross written premiums (GWP) over the next three years of -2 per cent, -5 per cent and -5 per cent year on year (y-o-y).
Maybank IB Research noted that while Allianz General's outlook remains challenging, Allianz Life continues to provide the impetus for growth with projected new business value growth of at least 15 per cent per annum in the near future.
Maybank IB Research's financial year 2017 to 2019 (FY17 to FY19) Allianz group net profit forecasts were tweaked by a decrease of two per cent, increase of one per cent and increase of four per cent respectively to account for revisions to the research arm's GWP assumptions for Allianz General.
As a result, Maybank IB Research's target price was raised to RM14.70 per share from RM14.05 per share but maintained ‘buy' on the stock.