ALLIANZ: Financial Performance Exceeds Expectations on Cost Controls, Maintains Neutral Rating

Performance Review

Allianz Malaysia’s second-quarter 2025 results largely surpassed market expectations, with net profit surging 28% year-on-year to MYR214 million. This brought the first-half 2025 net profit to MYR427 million, marking a 20% increase year-on-year and accounting for approximately 55% of both RHB and consensus full-year estimates. The robust performance was primarily driven by higher-than-expected insurance service results, attributed to lower reinsurance expenses.

The group demonstrated strong operational resilience, with overall insurance revenue growth climbing a robust 12% year-on-year. This was fueled by significant contributions from both the general and life insurance segments. A more favorable claims experience led to an uptick in the underwriting margin, reaching 17% in 1H25, up from 15% in 1H24. Furthermore, net investment income saw a notable rebound in 2Q25, reversing the marked-to-market losses experienced in the first quarter of the year.

Segmental Highlights

The general insurance segment (AGIC) maintained its strong performance, recording MYR1.7 billion in insurance revenue for 1H25, a 14% year-on-year increase, driven by higher recognition from motor and fire businesses. An improved claims experience, up 2% year-on-year, contributed to an easing of the reported combined ratio by 1.5 percentage points year-on-year to 87%. AGIC remains the market leader in the domestic general insurance segment, holding a 15.1% market share as of June 2025.

The life insurance segment (ALIM) also benefited from strategic initiatives, notably the repricing of a large block of policies in April 2025. This move resulted in a strong new business value of MYR171 million in 2Q25, representing a 37% year-on-year and 43% quarter-on-quarter increase. Consequently, the contractual service margin (CSM) balance expanded 5% year-on-year to MYR3.6 billion. While ALIM faced an upwards normalisation of incurred claims, this was largely mitigated by higher net investment income of MYR89 million, a significant turnaround from a net loss in 1Q25.

Future Outlook and Recommendation

Despite the strong first-half performance, RHB maintains a cautious outlook for the second half of 2025, particularly for AGIC, due to the anticipated commencement of the monsoon season. Ongoing challenges such as medical inflation also persist. While investment income is expected to post another strong quarter in 3Q25, this could be offset by higher reinsurance expenses from AGIC in 2H25.

RHB has maintained its “Neutral” recommendation for the company, with an unchanged target price of MYR19.60, which includes an unchanged 6% ESG premium. The target price reflects a 9.5% upside from the last traded price of MYR17.90. The bank’s forecasts remain unchanged as the recent results were broadly in line with its expectations.