Allianz Malaysia will be facing a challenging 2020 especially with its general insurance sales.
According to the RHB Retail Research, new sales from life insurance will moderate but contributions from policies in effect should cushion the temporary hiccup.
Both agency and bancasssurance sales has also seen an impact. The agency division is still able to generate some level of new business during the MCO period by leveraging on the digital platform.
In terms of bancassurance with HSBC, sales have slowed significantly since April.
The research house further opines that impact is negligible as Allianz has so far received only RM3 million in applications .
The insurance provider will also not foresee any spike in withdrawal and lapse rates.
“We believe 2020 GWP could possibly still see mild positive growth, despite a likely contraction in annualised new premiums, mainly on contributions from its existing in-force policies,” the research house said.
Earnings will also likely come under pressure as last year’s earnings were boosted by a one-off liability release and some very sizeable fair value gains, not withstanding the projected slower topline growth.
Allianz Malaysia Bhd chief executive officer Zakri Khir said in a news report that the insurance industry was facing twin setbacks of sharp decline in crude oil prices and demand and supply uncertainty.
RHB in its research notes further highlighted that Allianz General may foresee lower new car sales projection as motor insurance accounts for 63 percent of AGIC’s GWP and relies heavily on franchise distribution.
“Although motor claims should improve in 2Q20, auto parts could be more expensive as a result of a weak RM and MCO-induces supply disruptions,” the research house said.
“We expect Allianz to record double-digit topline growth in 1Q20, as there were only two weeks of MCO in 1Q20. However earnings could shrink on fair value losses due to the tumultous equity market and spike in bond yields as well as a sizeable fire claim payment,” it added.
The research house is also cutting FY20 forecasts by 13 percent in view of the challenging operating environment.
“Keep BUY, new MYR16.70 TP from MYR18.20,19 percent upside with c.3 percent FY20F yield”