Allianz Malaysia sees jump in 2Q18 profits

KUCHING: Allianz Malaysia Bhd’s net profit in the second quarter of financial year 2018 ( 2Q18) jumped by 36.7 per cent year on year ( y- o-y) on the back of stronger net earned premium growth and a reversal in net change in contract liabilities.

Overall 1H18 results was above market expectations as well as those of Affin Hwang Investment Bank Bhd (AffinHwang Capital).

“Our forecasts are under review pending a meeting with management. In any case, we expect a much better earnings outlook in 2H18 due to the absence of impairments and potential sale of highermargin investment-linked products (recurring premium).

The insurer’s 2Q18 net profit rose by 36.7 per cent y- o-y in due part to stronger net earned premium ( NEP) growth and lower liabilities.

“Allianz Malaysia’s 2Q18 net profit grew by 36.7 per cent y- o-y while 1H18 net profit remained robust with a rise of 33.2 per cent y- o-y.

“The key drivers to 1H18 results were stronger NEP growth which went up by 9.4 per cent y- o-y; lower net change in contract liabilities of 77.3 per cent y- o-y; and lower management expense due to absence of receivables impairment.

“Nonetheless, this was offset by higher net claims (given a higher retention rate) and mark-to-market losses for its trading book. Overall results came in above our and consensus estimates.”

AffinHwang Capital saw that Allianz Malaysia’s general business contributed to the bulk of the group’s pre- tax profit, accounting for approximately 67 per cent while the life segment was at 33 per cent.

The general business’ pre-tax profit was RM165.4 million in the first half of 2018 (1H18) with higher underwriting profit from a lower expense ratio while NEP was up 5.7 per cent y- o-y.

Motor remains the largest contributor at 62 per cent to gross written premiums, it said.

“The 1H18’s profit before tax for life business was up 22.6 per cent y- o-y to RM82 million largely due to sharply lower net chage in contract liabilities, though offset by a fair-value loss of its financial assets held-for-trading.”

It thus maintained a buy call on Allianz Malaysia at an unchanged target price of RM17.60 per share.