KUCHING: Allianz Malaysia Bhd (Allianz) expects to ride the growth in the healthcare sector through its life insurance division, with medical insurance as a rider to market its life products.
As a composite insurer, it is involved in both the life and general insurance business.
According to RHB Research Institute Sdn Bhd (RHB Research), medical or health insurance was sold under both life and non-life policies, thus giving Allianz a full exposure towards the growth in the healthcare sector.
The research house said it was also the largest general insurer in Malaysia by gross premiums as at financial year 2009 (FY09), with a total market share of 10 per cent.
However, in terms of medical insurance, Allianz was ranked fourth with a total market share of 6.3 per cent, behind American International Assurance Bhd (AIA), Berjaya Sompo Insurance Bhd (Berjaya Sompo) and The Pacific Insurance Bhd (Pacific Insurance).
RHB Research pointed out that for its overall non-life portfolio, Allianz medical and health insurance contributed only 3.2 per cent of total gross premiums.
The research house stated that Allianz’s recently-concluded irredeemable convertible preference shares (ICPS) issuance strengthened its positive view on the company based on the proceeds of RM611 million was partially used to fully settle its RM490 million loan from parent Allianz SE.
Other reasons included the rest of proceeds being used to strengthen its internal capital adequacy ratio (ICAR) for both its life and general insurance divisions, giving it more flexibility in underwriting riskier business and the ICPS increasing the number of securities Allianz had listed by 125 per cent, thus improving the liquidity of its shares.
Moreover, the ICPS paid 20 per cent more dividends and could be converted to ordinary shares after 12 months.
The risks to the research house’s forecast included lower-than-expected premium growth, a jump in claims ratio, change in Bank Negara Malaysia policy that would require Allianz to further strengthen its ICAR and the changing competitive landscape in the insurance industry due to liberalisation.
RHB Research said there was no change to its FY10-FY12 earnings forecast for now.
The research house highlighted that despite the change in capital structure and earnings dilution which was already factored into its forecast, it was maintaining its positive stance on the stock.
RHB Research favoured Allianz due to its above industry average premium growth and below industry average claims ratio for its general insurance, the bancassurance tie-up with the CIMB group, the positive growth outlook of the Malaysian life insurance industry and strong backing from parent, Allianz SE.
The research house pegged the fair value for Allianz’s share at RM5.32 per share.