Maybank Investment Bank Bhd (Maybank IB) has maintained its BUY recommendation for Allianz Malaysia Bhd despite the financial institution reporting a weaker-than-expected net profit for the third quarter of 2024 (3Q24). The net profit of RM183 million marked a 7% decline year-on-year (YoY), but a 10% increase quarter-on-quarter (QoQ).
This result brought the nine-month profit for 2024 to RM540 million, which is 69% of Maybank IB's full-year forecast and missing expectations largely due to higher operating expenses and less favourable foreign exchange movements impacting investment-linked funds.
However, Maybank IB said its 9M24 net financial and investment results of RM904 million (11% YoY) were within the research house's expectations.
As such, Maybank IB maintained its target price of RM24.85 for Allianz, based on a sum-of-the-parts valuation, with a potential upside of 21%.
Nevertheless, Allianz's topline continued to expand at a robust pace of 14.2% YoY in 3Q24, with growth of 18.2% YoY in motor premiums. Its 3Q24 combined ratio was lower QoQ at 89.3% versus 90.1% in 2Q24. Its combined ratio was a higher 88.7% in 9M24 versus 85.7% in 9M23, due to higher fire and engineering claims, offset in part by a lower expense ratio. As such, Allianz's pretax profit was 4% lower YoY in 9M24 at RM388 million.
While Allianz's 3Q24 results were slightly below expectations, the strong topline growth and healthy performance in both its general and life insurance segments offer a positive outlook.
Although Maybank IB has trimmed its earnings forecasts for FY24/FY25/FY26 by 6%, 3% and 3%, respectively, mainly due to higher operating expenses, the research house continues to view Allianz as an attractive investment.
