PP 7767/09/2010(025354)

27 May 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
27 May 2010
MARKET DATELINE

Allianz Malaysia Share Price

Fair Value
:
:
RM4.82
RM6.68
1QFY12/10 Results Within Expectations Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (Allianz; Code: 1163) Bloomberg: ALLZ MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/NTA P/CF ROE Gearing GDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2009 2,222.7 118.8 77.2 68.0 11.7 - 2.1 11.7 20.0 1.3 0.4
2010f 2,460.8 110.6 71.9 -7.0 6.9 59.0 1.6 6.2 26.6 1.0 0.4
2011f 2,720.0 132.6 86.2 29.7 7.1 68.0 1.3 7.1 19.7 Net cash 3.2
2012f 2,933.5 153.5 99.7 15.8 6.2 - 1.1 6.2 19.6 Net Cash 3.7
Main Market Listing / Non-Trustee Stock / Non-Syariah-Approved Stock By The SC * Consensus Based On IBES

♦ Within expectations. Allianz recorded 1QFY12/10 net profit of RM23.2m,

RHBRI Vs.
Above
Consensus

an increase of RM2.93m or 14.5% yoy. Revenue increased by 28.2% yoy,

In Line
underpinned by growth in both life and general insurance gross premiums.
Below
1Q net profit came in at 21% of our full year earnings estimate and 25.5%
of consensus estimate, which we consider to be in line with expectations.
Issued Capital (m shares) 153.8

♦ Qoq. Revenue grew by RM7.7m or 1.2% qoq due to higher gross premium
Market Cap (RMm) 741.3
Daily Trading Vol (m shs) 0.04
earned of RM6.8m and higher investment income of RM0.9m. Profit before
tax however was lower by RM47.2m due to lower underwriting results from 52wk Price Range (RM) 3.80 – 5.56
the general insurance and the exclusion of surplus transfer from the life Major Shareholders: (%)
insurance business, which is normally determined at the end of the year Allianz SE 75
(RM12m transferred in 4Q09).
FYE Dec FY10 FY11 FY12
♦ General and life insurance. Gross premium for general insurance grew EPS chg (%) - - -
by 25.1% yoy or RM68.5m while surplus profit transferred grew by 20.2% Var to Cons (%) 21.9 26.8 -
to RM33.3m from RM27.1m in 1QFY09. The life insurance gross premiums
PE Band Chart
grew by 35.6% or RM63.8m, while the segment’s profit almost doubled
from RM1.5m to RM2.9m.
PER = 7x
♦ Overall ratios. Overall claims ratio of 71.4% was higher than 1Q09 of PER = 6x
PER = 5x
65.6%, as well as higher overall commission ratio of 24.5% vs. 22.9%.
Overall management expense ratio, however, was lower at 13.5% vs.
17.8%, indicating improved cost controls. We are unable to provide
separate ratios for each general and life insurance segments as the
adoption of new FRS accounting standards has resulted in a combined
comprehensive income statement. However, we expect the details to be
provided at the company’s analysts briefing later today. Relative Performance To FBM KLCI

♦ Risks. The risks include: 1) lower-than-expected premium growth; 2)

Allianz Malaysia
jump in claims ratios; 3) intense competition from insurance sector
liberalisation; and 4) a change in BNM policy that would require Allianz to FBM KLCI
further increase its Internal Capital Adequacy Rato (ICAR), in compliance
with RBC requirements.

♦ Forecasts. We are maintaining our forecasts as we believe Allianz is still

on track to meet our full-year FY12/10 earnings estimate of RM110.6m
due to: 1) year-end transfer from life insurance business; 2) removal of
the notional interest charged on its inter-company loan after utilisation of
ICPS proceeds.

♦ Recommendation. We maintain our Outperform call on the stock with

unchanged SOP fair value of RM6.68.

Yap Huey Chiang

Please read important disclosures at the end of this report. (603) 92802641
yap.huey.chiang@rhb.com.my

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Table 2. Summary of results

QoQ YoY
FYE Dec (RMm) 1Q09* 4Q09* 1Q10 (%) (%)
Revenue 488.4 618.6 626.3 1.2 28.2 Higher revenue was due to growth in both
general and life insurance gross premiums
by 25.1% and 35.6% yoy respectively
Gross earned premium 452.5 577.1 584.8 1.3 29.2
Net Claims -223.5 -152.8 -310.5 103.1 38.9
Investment income 36.0 40.6 41.5 2.2 15.3
Profit before tax 29.1 82.9 35.7 -56.9 22.7 Profit before tax lower qoq due to lower
underwriting results from general insurance
and the exclusion of surplus transfer from
life fund
Tax -8.9 -22.8 -12.6 -44.8 41.4
Tax rate (%) -30.5 -27.4 -35.2 Higher effective tax rate vs. statutory tax
rate of 25% is due to income tax on life
fund and effects of certain non-deductible
expenses
Net profit 20.2 60.2 23.2 -61.5 14.5

*Some comparative figures for FY09 have changed due to adoption of new FRS accounting standards
Source : Company, RHBRI

Table 3. Earnings Forecasts Table 4. Forecast Assumptions

FYE Dec (RMm) FY09 FY10F FY11F FY12F FYE Dec (%) FY10F FY11F FY12F

Life premium 868.7 973.0 1,089.7 1,176.9 General

General premium 1,202.4 1,322.6 1,454.9 1,600.4 Premium growth 10.0 10.0 10.0
Other revenues 151.6 165.2 175.4 156.3 Retention ratio 64.0 64.0 64.0
Total Turnover 2,222.7 2,460.8 2,720.0 2,933.5 Claims ratio 60.0 60.0 60.0
Commission ratio 10.0 10.0 10.0
Profit from s/holders (6.5) (6.3) (6.2) (5.2) Mgmt exp ratio 18.0 18.0 18.0
funds
Transfer from 161.0 163.3 179.6 197.5 Combined ratio 88.0 88.0 88.0
general
Transfer from life 12.0 13.4 16.0 26.9 Invt return 4.0 4.0 4.0
Finance cost 0.0 (12.5) 0.0 0.0
Life
Premium growth 12.0 12.0 8.0
Pretax Profit 166.5 158.0 189.4 219.2 Retention ratio 93.0 93.0 93.0
Tax (47.7) (47.4) (56.8) (65.8) Claims ratio 7.0 7.0 7.0
Commission ratio 25.0 25.0 25.0
Net profit 118.8 110.6 132.6 153.5 Mgmt exp ratio 10.0 10.0 10.0
Combined ratio 42.0 42.0 42.0
Invt return 5.0 5.0 5.0

Source: Company data, RHBRI estimates

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IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
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be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
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may from time to time have an interest in the securities mentioned by this report.

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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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