Insurance. A better Life than General. OVERWEIGHT (maintain) Sector Update

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1 A better Life than General General insurance sector premiums fell by.9% yoy for 1H17, while life insurance performed better with 5.9% yoy growth as consumers prioritised protection over consumption. We remain positive on the long-term outlook in the insurance sector given Malaysia s favourable demographic patterns, but note that more effort and measures are likely needed to boost the stagnating penetration rate. We maintain our OVERWEIGHT sector view with Allianz Malaysia as our top pick. General segment continue to decline For 1H17, the general insurance sector premiums fell by 1.8% yoy while general takaful sector contribution rose 5.9% yoy. Nonetheless, the general sector gross direct premiums and contribution fell by a combined.9% yoy. This represents the second half-yearly period yoy fall since 2H16, mainly driven by a drop in the marine, aviation and transit segments and continued weakness seen in motor and fire insurance segment growth. Life and family segment grew on demand for protection For 1H17, the life insurance sector and family takaful sector s annualised new premium/contribution (ANP) grew yoy by 5.5% and 7.3%, respectively. Combined, they rose by 5.9% yoy. The life segment has been witnessing a relatively stronger ANP growth, vs. the general segment since 215, possibly due to a shift in consumer focus from consumption to protection. Universe continues outperforming industry; consolidation inevitable Companies within our coverage continue to outpace industry growth. We believe that such industry outperformance is due to the respective companies established distribution network, well-planned strategy and/or niche offerings. We believe that industry consolidation is inevitable in the long-run as an insurer s size remains crucial for long-term competitiveness, in terms of economies of scale for costs and investments, meeting capital requirements, branding and even risk management. Regulatory reforms progressing smoothly Our market research with the insurance companies reveal that regulatory reforms, be it de-tariffication for general insurance or the LIFE framework for life insurance, are progressing smoothly without any significant disruptions observed thus far. News of potential listings of insurers such as Etiqa, Great Eastern etc. could also generate more interest and awareness in the sector, in our view. Stock picks We continue to like Allianz Malaysia (ALLZ MK, RM14.52, BUY) as our top sector pick for its meaningful exposure to the general and life-insurance segments, as well as its attractive valuation where we believe its life insurance business remains undervalued and misunderstood by investors. Peer Comparison Company B lo o mberg Rating Price TP Mkt Cap Mkt Cap Year PE (x) EPS growth (%) P/B ROE (%) Div. Yield (%) C o de (RM) (RM) (RMm) (US$m) end CY17E CY18E CY17E CY18E (x) CY17E CY18E CY17E CY18E Allianz Malaysia Bhd* ALLZ MK BUY ,28 1,18.2 Dec LPI Capital Berhad LPI MK BUY ,923 1,39.1 Dec Tune Protect Group Bhd TIH MK BUY Dec Syarikat Takaful Malaysia STMB MK N/R 3.9 Not rated 3, Dec Sector average 15,936 3, Source: Bloomberg, Affin Hwang forecasts * Includes ICPS; note: based on prices as of close on 5 September 217 Sector Update Insurance OVERWEIGHT (maintain) Absolute Performance (%) ALLZ LPI TIH Relative Performance (%) M 3M 12M (.1) (4.4) (16.9) (3.8) 5 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Source: Affin Hwang, Bloomberg Allianz LPI Tune Protect Loh Jia Ying (63) jiaying.loh@affinhwang.com Tan Ei Leen (63) eileen.tan@affinhwang.com Page 1 of 15

2 Sector potential remains untapped Malaysia s favourable demographics, including a young population and growing middle class, remain supportive of a long-term structural growth for both general and life insurance. However, the penetration rate has stagnated in recent years. We believe that the government has a bigger role to play alongside the industry players and regulators. Ensuring proper financial education to the public and providing relevant tax incentives for policy purchase are among measures that should be considered to avoid the social costs of an under-insured population. Maintain sector OVERWEIGHT; Top pick Allianz Malaysia While we believe that the general insurance and general takaful segments are likely to take a back seat compared to life insurance and family takaful counterparts in the short term due to subdued spending patterns, the potential for the overall under-penetrated insurance industry in Malaysia remains very strong. Favourable demographic trends, ongoing reforms will likely continue to drive sector growth, while potential catalysts such as tax incentives and public listings could drive investors interest and understanding of the sector. Therefore, we maintain our OVERWEIGHT stance on the insurance sector with our top sector pick being Allianz Malaysia (BUY, Target price: RM16.3) due to its significant exposure in both the general and life insurance segments and attractive valuations. We also like LPI Capital (BUY, Target price: RM21.4) and Tune Protect (BUY, Target price: RM1.15) due to their niche in fire and travel insurance, respectively. Key downside risks to our sector call: a slowdown of household income growth, continued lack of financial education and awareness for the need of insurance. Page 2 of 15

3 Prospect of another weak year in the general segment Weak trend continues as industry premiums decline For 1H17, the general insurance sector premiums declined by 1.8% yoy while the general takaful sector contribution increased 5.9% yoy. Nonetheless, the general sector gross-direct premiums and contribution declined by a combined.9% yoy. This represents the second half-yearly period yoy decline since 2H16. Dismal MAT and lacklustre vehicle, property markets the culprits The marine, aviation and transit (MAT) segment recorded a decline of 13.1% yoy for 1H17, mainly due to a prolonged downturn in the oil and gas sector. Meanwhile, motor-vehicle sales (see Fig 3) and property sales (see Fig 4) remain lacklustre due to stricter credit approvals adopted by banks and the resulting effects of the BNM s tighter lending measures and macro-prudential policy (since July 213). The continued weakness in national currency and implementation of GST (since April 215) had also affected consumers appetite for big-ticket items. As the combined motor, fire and MAT segment constitutes ~75% of industry gross premium and contribution, industry growth is likely to be flat for 217 as we do not expect a significant rebound in the motor, property or oil and gas industry for the remainder of the year. Demand for protection drives life and family growth Industry premium increased on demand for protection For 1H17, the life insurance sector and family takaful sector annualised new premium/contribution (ANP) grew by 5.5% yoy and 7.3% yoy, respectively. Combined, they grew by 5.9% yoy. The life segment has been witnessing a relatively stronger ANP growth compared to the general segment since 215. We believe that such changes in industry dynamics could be due to a shift in consumer focus from consumption to protection. While there are encouraging signs of higher awareness among the population to have a life insurance or family takaful policy, the sum insured per person remains low at ~RM42,. This remains grossly insufficient compared to the estimated mortality gap of RM723, per family or assuming 5 members per family, RM1,- RM15, per family member (Source: 212 Underinsurance Study in Malaysia by Life Insurance Association of Malaysia and Universiti Kebangsaan Malaysia). Fig 1: General insurance and general takaful growth Fig 2: Life insurance and family takaful growth 11, Gross Direct Premium & Contribution (LHS) YoY growth (RHS) 1. 4, 6-months annualised new premium and contribution YoY Growth 1,5 1, 9,5 9, ,5 3, 2,5 15% 1 8,5 4. 2, 8, 7,5 7, 6, ,5 1, 5 5% 6, % Page 3 of 15

4 Fig 3: Motor vehicle sales Fig 4: Property sales unit 4, TIV (LHS) YoY growth (RHS) 1. RMm 9, Property sales (LHS) YoY Growth , 3, 25, 2, 15, , 8, 75, 7, 65, 6, 55, , -2. 5, 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16-2. Source: MAA Source: NAPIC Our universe continues to outperform industry Companies within our coverage continues to grow healthily In contrast to the weaker industry performance, the general insurance businesses for companies within our coverage continue to post healthy grosswritten-premium (GWP) growth for 1H17. Meanwhile Allianz Life grew at a strong pace of 27.4% yoy for 1H17, significantly outperforming the industry growth rate (see Fig 5). Fig 5: Universe vs industry average 1H17 Allianz General Lonpac Tune Insurance Allianz Life GWP/ANP (RMm) 1, Industry premium (RMm) 8,955 8,955 8,955 2,782 Estimated market share (%) Growth yoy (%) Industry growth yoy (%) Outperformance (%) Source: Company data, Bank Negara Malaysia, Affin Hwang estimates Outperformance due to established distribution network and marketing We believe that such industry outperformance is due to the companies established distribution network, well-planned strategy and/or niche offerings. Based on 216 PIAM statistics, we note that Allianz General remains significantly ahead of its closest peers in terms of market share (1 st with 12% overall market share), while LPI continues to have a dominant position in the fire-insurance segment (1 st with 16% market share, 6 th with 7% overall market share). Meanwhile, Tune Insurance Malaysia Berhad, the general insurance arm of Tune Protect, remains a much smaller player (16 th with 2.5% market share). Allianz Life on the other hand is the 5 th largest life insurance player with 6.7% ANP market share. Page 4 of 15

5 Consolidation inevitable; size matters in the long run Market share getting concentrated Comparing the market share distribution between 211 and 216 for general and life insurance industry, we noticed that the market share is increasingly concentrated among the largest players. While this may be partly due to the effect of industry consolidation, we believe a larger size does allow an insurance company to compete more effectively. Economies of scale Larger insurance companies would have larger balance sheet and are relatively well capitalised for future growth. This is crucial as capital requirements for the industry are likely to get more stringent rather than relaxed in the future. A larger scale would also allow economies of scale for management expenses, especially for certain support functions such as IT infrastructure, compliance, etc More than just cost and capital However, apart from merely cost and capital factors, larger insurance companies often own stronger brand names, which are useful in providing confidence and reassurance to potential policy buyers as well as for recruitment of agents. In order to stay relevant with emerging trends, insurance companies will likely also need to continuously invest and such investment amounts could be a disproportionately high burden for the smaller players due to their much lower premium income base. Furthermore, from a risk-management standpoint, a larger pool of customer would help to enhance the statistical significance of assumptions made in products technical pricing (especially for new products) and help in risk-spreading. All these financial and operational factors are crucial to ensure competitiveness of an insurance company in the long run. Fig 6: General insurance market share 211 Fig 7: General insurance market share 216 General insurance market share 211 (by gross written premium) General insurance market share 216 (by gross written premium) Allianz General, 1.5% Allianz General, 11.8% MSIG, 8.9% AmGeneral, 8.9% Others, 53.3% Etiqa, 8.3% Others, 48.3% MSIG, 8.6% Kurnia, 7.7% Lonpac, 5.8% Tokio Marine, 5.6% Lonpac, 6.8% Etiqa, 7.4% Axa Affin General, 8.3% Source: PIAM, Affin Hwang estimates Source: PIAM, Affin Hwang estimates Page 5 of 15

6 Fig 8: Life insurance market share 211 Fig 9: Life insurance market share 216 Life insurance market share 211 (by ANP) Life insurance market share 216 (by ANP) Others, 27% Great Eastern, 24% Others, 22.7% Great Eastern, 22.6% Hong Leong Assurance, 9% AIA, 7% ING, 12% Prudential, 21% Allianz Life, 6.7% Hong Leong Assurance, 1.5% AIA, 18.8% Prudential, 18.8% Source: LIAM, Affin Hwang estimates Source: LIAM, Affin Hwang estimates Further consolidation in the future The pace of industry consolidation has moderated in recent years, most likely due to the mismatch between potential buyers and sellers expectations. We believe that this could eventually narrow down as shareholders of smaller insurance companies reassess their positions and lower their expectations. The impending separation of general and family takaful license by July 218 under the Islamic Financial Services Act 213 would also further spur consolidation as smaller players may find it hard to justify the additional investments needed to meet the capital requirements. We believe that the future landscape of the industry entails a lesser number of players with more concentrated market share. The remaining smaller players would need to search for a niche segment to survive and compete effectively and efficiently against their larger peers. Page 6 of 15

7 Industry-shaping developments 2 nd phase of detariffication started The second phase of BNM s general industry liberalisation started since 1 July 217. As a result, there is now an additional level of flexibility accorded to the industry players in the pricing of motor and fire premiums. While the pricing adjustments currently remains controlled within a prescribed range of ±1 from the current tariff rates for motor policies and ±3 from current tariff rates for fire policies, it is possible that the BNM will further relax the range after 219. However, we believe that BNM would take into account the sustainability of the premium levels against the escalating industry claims and expenses. Effects should be gradual While it is still early days, from our market research, there has not been intense industry-wide pricing competition. For selected players who are aiming to gain market share by cutting premium rates, it remains to be seen if such actions are sustainable especially for the motor segment, which has been affected by high claims. We are of the view that there will not be a price war due to i) no free-floating of premiums; ii) inherent high motor-claims ratio; and iii) stringent capital requirements. We also believe that the liberalisation is positive for the industry in the long run as industry players will be allowed to price policies based on the underlying risk profile of individual customers compared to the current indirect cross-subsidisation model under the tariff system (lower risk groups are effectively subsidising higher risk groups by paying the same premium) LIFE framework positive for the industry The Life Insurance and Family Takaful Framework (LIFE framework) was implemented since late-215, with transitional phases being implemented up till 219. The three key pillars of the framework, ie, gradual removal of limits on operating costs, diversification of distribution channels and strengthening market practices are reforms crucial to support the long-term development of the life insurance and family takaful industry. It is expected to play a role in improving the life insurance penetration rate in the country. For more details on LIFE framework, please refer to Appendix II of our Allianz Malaysia initiation report, Undervalued, underappreciated gem, 3 July 217. Potential listings in the cards Based on various local news sources (ie The Edge), there could be potentially a slew of initial public offerings in the insurance industry, with some estimated as early as 1H18. It is possible that Etiqa group of companies may be spun-off from Maybank (MAY MK, RM9.42, BUY) to enhance shareholder value, while foreign insurers such as Great Eastern, Prudential, AIA and Tokio Marine may potentially be listing their local arms on Bursa Malaysia to comply with the foreign shareholding requirement. Should such listings materialise, these are expected to increase visibility of these companies and spur investors and the public s interest in the sector. Page 7 of 15

8 Long-term potential remains untapped Demographic patterns are supportive We remain long-term positive on the overall insurance industry as Malaysia has a favourable demographic pattern, including a young population, growing middle class and strong household formation, all of which are supportive of the demand for general and life insurance products. Moreover, the Malaysian insurance market remains significantly under-penetrated compared to its more developed and affluent Asian peers, suggesting massive untapped potential....but more needs to be done While demographic patterns are supportive of future growth, the insurance penetration rate has remained relatively stagnant in recent years. The government has realised the potential social costs of a low penetration rate and has set its sights on improving it under the Economic Transformation Program (ETP). This, however, has not been accompanied by much follow-up actions or policies. While efforts have been made by authorities in pushing regulatory reforms, such reforms have largely placed the burden on industry players with little support provided by the government or other stakeholders. Government needs to play a bigger role In our opinion, the government needs to play a bigger role, especially in terms of improving financial education and awareness of insurance products. These initiatives would have been more effective should they be incorporated as part of the national education system. We also strongly believe that the current tax relief available are long overdue for a review as it has not been revised for more than a decade. Inflationary costs over the years itself would have rendered the current tax relief quantum grossly inadequate. In our view, an increase in the tax-relief quantum, or the unbundling of the tax-relief categories is necessary to incentivise taxpayers, especially those from the middle class, to ensure they are adequately insured should the unfortunate happens. Illustration of current tax relief inadequacy The current tax-relief measures available are summarised in Fig 1. As there is a limit on the tax relief available for education and medical insurance, this could discourage taxpayers from buying both or force them to choose to spread the amount between two products, for which ultimately the sum insured may be inadequate for both products. Besides, the life-insurance tax relief is essentially redundant once a taxpayer s monthly income exceeds RM4,55 (see Fig 11). As the general income level continues to rise over the years, the quantum of these tax-reliefs measures are increasingly inadequate as an incentive to taxpayers, defeating the purpose of such tax relief. Fig 1: Category Current available tax-relief measures for insurance purchase Tax relief available Education and medical insurance EPF and life insurance Combined limit of RM3, per year Combined limit of RM6, per year Source: Inland Revenue Board Page 8 of 15

9 Fig 11: Current tax-relief measures do not incentivise enough Items RM Monthly income 4,55 Monthly EPF 51 Annual EPF contribution 6,6 Available life insurance tax incentive Nil Source: Affin Hwang estimates Tax-relief revisions would be a shot in the arm Should the government increase the tax-relief amount available in each category, it would provide a much-needed boost to the industry. Alternatively, the government could unbundle the categories, which may potentially double the existing education and medical-insurance market. Our back-of-theenvelope calculation reveals that should the government decide to unbundle life insurance from EPF contribution and accord it a separate RM3, tax relief, that could potentially incentivise an additional ~RM2.2bn in annual life insurance premiums, or 38% and 7%, respectively, of current industry ANP and premiums-in-force. Fig 12: Potential impact of unbundling life insurance from EPF Items Amount Monthly income RM 4,55 Total monthly EPF contribution (11%+12%) RM 1,47 Annual EPF contribution RM 12,558 Number of EPF members contributing >RM1, per person 7,256,351 annum Assume 5 active and contributing members person 3,628,176 Assume active members incentivised person 725,635 Additional premiums generated (assuming RM3, additional tax relief) RMm 2,177 Source: Department of Statistics, Affin Hwang estimates Maintain OVERWEIGHT on the sector; Allianz Malaysia remains top pick While we believe that the general insurance and general takaful segments are likely to take a back seat over its life insurance and family takaful counterparts in the short term due to subdued spending patterns, the potential for the overall under-penetrated insurance industry in Malaysia remains very large and untapped, in our view. We believe favourable demographic trends, ongoing reforms coupled with potential catalysts such as tax incentives and public listings will drive investors interest and understanding of the sector. Thus, we maintain our OVERWEIGHT stance on the insurance sector with our top sector pick being Allianz Malaysia with a SOTP-based 12-month TP of RM16.3 due to its significant exposure in both the general and life insurance segments and attractive valuations. Downside risk on Allianz Malaysia would be stiffer-than-expected competition from de-tariffication. We also like LPI Capital with a 12-month TP of RM21.4 (based on a 3.27x 218E P/BV) and, among small caps, Tune Protect, with a 12-month TP of RM1.15 (based on 1.55x 218E P/BV), due to their niche in the fire and travel-insurance segments. Key downside risks would be a higher-than-expected claims ratio. Page 9 of 15

10 Appendices Fig 13: General and life insurance penetration Fig 14: General and life insurance density 5. Life insurance penetration General insurance penetration RM/ person 1,2 Life insurance density General insurance density 4.5% % % 1.6% 1.8% 1.6% 1.8% 1.6% 1.8% 1.5% 1.6% 1, 8 2.5% % 1..5% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.8% 2.8% 2.7% 4 2. Source: Bank Negara Malaysia, Department of Statistics, Affin Hwang estimates Source: Bank Negara Malaysia, Department of Statistics, Affin Hwang estimates Fig 15: Life insurance penetration by policies Fig 16: Capital adequacy ratios Significant gap remains to achieve ETP target by 22 75% % General insurance companies Life insurance companies Consolidated industry % 54.4% 54.1% 54.9% 54.5% 54.9% 54.2% 54.7% 54.1% Source: Bank Negara Malaysia, Department of Statistics, Affin Hwang estimates Source: Bank Negara Malaysia Fig 17: Population and employment force Fig 18: Outstanding households m Labour force Population m Population between 2-39 years (LHS) Number of households (RHS) ' Source: Department of Statistics Source: Department of Statistics Page 1 of 15

11 General insurance Fig 19: Gross direct premium growth Fig 2: Growth by line of business 9,5 Gross Direct Premium (LHS) YoY growth (RHS) 1. YoY growth 25% Motor Fire MAT Medical & PA Others 9, 8. 15% 8, , 4. 5% 7,5 7, % -1 6, % 6, Fig 21: Distribution of gross direct premium Fig 22: Technical reserves 1 9 Motor Fire MAT Medical & PA Others 12.9% 13.4% 12.9% 13.5% 12.6% 13.5% 13.1% 12.8% Claims liabilities over net premium Premium liabilities over net premium % 12.7% 14.5% 12.5% 14.2% % 13.6% 1.7% 7.7% % 8.6% % 8.8% % 45% 45% 46% 45% 46% 46% 45% 46% % 45.2% 16.4% 49.7% 16.6% 17.4% 16.7% 17.1% 45.9% 48.5% 45.7% 48.5% 18.1% 44.9% 17.7% 49.6% 18.9% 46.7% % 83% 8 85% 86% 93% 88% 9 87% 1 Fig 23: Combined ratios and underwriting margin Fig 24: Underwriting and operating profit Claims incurred ratio Commissions ratio Management expenses ratio Underwriting margin 11.5% 14.2% 11.8% % 1.1% 12.9% 11.5% 8.5% % 18.2% 2.3% 19.9% 21.4% 21.5% 22.6% 23.3% 11.7% 11.7% 11.9% 11.5% 11.3% 11.2% 11.1% 11.2% 11.3% 1,6 1,4 1,2 1, Underwriting Profit Investment income and others YoY growth % 15% 1 5% 4 6-5% % 54.6% 58.3% 56.2% 57.1% 57.2% 54.4% 54.7% 56.9% % - -25% Page 11 of 15

12 General takaful Fig 25: Gross contribution growth Fig 26: Growth by line of business 14 Gross contribution (LHS) YoY growth (RHS) 16. YoY growth 6 Motor Fire Medical & PA Others Fig 27: Distribution of gross contribution Fig 28: Technical reserves Motor Fire Medical & PA Others 12.3% 9.1% 12.2% % 6.7% 9.2% 7.6% 8.5% 8.3% 1.9% 9.5% 9.5% 1.2% % 11.6% 9.8% % % 19.1% 19.7% 21.3% 2.7% 22.2% % 77% Premium liabilities over net premium Claims liabilities over net premium 69% 72% 67% 72% 7 69% 66% % 58.2% 61.1% 6.5% 63.4% 59.4% 61.7% 58.3% % 59% 6 57% 57% 54% 55% 53% Fig 29: Combined ratios and underwriting margin Fig 3: Underwriting and operating profit % 17.4% Claims incurred ratio Net commissions ratio 17.8% 18.3% 16.9% 6.7% 5.8% 12.8% 18.2% 28.1% 28.7% Management expenses ratio Underwriting margin % 1.3% % % 5.4% 29.2% 3.5% 31.1% % 5.9% 36.9% Underwriting profit Others Operating profit growth yoy % 51.1% 46.9% 48.6% 49.5% 54.2% 53.2% 44.6% 54.3% Page 12 of 15

13 Life insurance Fig 31: Annualised new premium growth Fig 32: In-force premium growth 3,5 6-months ANP YoY Growth 32, In-force premium YoY Growth 8.5% 3, 2,5 2, 1,5 1, 15% 1 5% 3, 28, 26, 24, % % 22, 6.5% -1 2, 6. Fig 33: Distribution of new business premium Fig 34: Distribution of in-force premium Investment-linked Endowment Temporary Whole-life Other ordinary life Annuity.1% 1..6%.2% 1.1% 3.2% 2.3% 1.5% 1.1% 9.3% 16.5% 13.7% 1.4% 7.2% 3.2% 21.1% 14.4% 13.4% 22.7% 21.5% 4.9% 2.8% 6.6% 3.4% 2.4% 2.8% 2.1% 2.2% 2.9% 16.6% 22.8% 18.2% 24.5% % 17.1% 18.8% 21.4% 19.2% 18.5% 14.4% 14.1% 14.4% 19.7% % Investment-linked Endowment Temporary Whole-life Other ordinary life 14.2% 13.6% 13.1% 12.6% 12.6% 12.2% 12.1% 11.5% 11.1% 26.7% 25.5% 24.5% 23.2% 22.2% 21.1% 2.1% 18.6% 17.5% 1.8% 1.7% 22.3% 22.8% 1.6% 1.6% 1.6% 1.6% 22.9% 22.8% % 1.5% 1.6% 23.3% 23.1% % 43.6% 39.4% 48.6% 37.6% 41.6% 32.8% 44.3% 42.1% % 36.9% 37.9% 39.6% 4.7% 42.2% 43.1% 45.1% 46.8% Fig 35: Policies surrendered Fig 36: Excess of income over outgo 4, 35, Surrender Surrender over in-force premiums % 1, 9, Excess of Income over Outgo Excess of income over outgo (excluding profit or loss on sale of assets) 3, 5. 8, 25, 4.5% 7, 6, 2, 4. 5, 15, 3.5% 4, 1, 5, % 3, 2, 1, 2. *Half-yearly surrender numbers are annualised for comparison purposes Page 13 of 15

14 Family Takaful Fig 37: Annualised new contribution growth Fig 38: In-force contribution growth 8 6-months annualised new contribution YoY Growth 25% 4,5 In-force contribution YoY Growth , % 1 3,5 3, 2, % 2, 1, , 6. Fig 39: Distribution of new business contribution Fig 4: Distribution of in-force contribution % 2.7% 2.4% 2.1% 1.9% 1.6% 4.6% 4.8% 3.4% % 2.6% % 2.6% 3.6% 3.1% 8.9% 7.1% 9.3% 1.9% % 18.1% 18.1% % Temporary Investment-linked Medical and health Endowment Other ordinary family 18.5% 22.2% 24.7% 2.1% 21.8% 21.2% 25.7% Temporary Investment-linked Endowment Other ordinary family Annuity.7% 3.7% 3.4%.7% 3.2%.7%.7% 3.3% 3.1%.6% 3.2%.6% 3.8%.6%.6%.6% 4.1% 4.3% 22.7% 21.7% 2.5% 19.4% 2.5% 19.5% % 17.2% 15.9% 16.6% 17.9% % 23.1% 24.2% % % % 62.1% 55.5% 6.7% % 57.7% 57.7% 55.7% 55.4% 53.6% 52.8% 52.9% 1 1 Fig 41: Surrenders Fig 42: Excess of income over outgo Surrender Surrender over in-force policies 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, *Half-yearly surrender numbers are annualised for comparison purposes RMm 1,4 1,2 1, Excess of Income over Outgo Excess of income over outgo (excluding profit or loss on sale of assets) Page 14 of 15

15 Equity Rating Structure and Definitions BUY Total return is expected to exceed +1 over a 12-month period HOLD Total return is expected to be between -5% and +1 over a 12-month period SELL Total return is expected to be below -5% over a 12-month period NOT RATED Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information only and not as a recommendation The total expected return is defined as the percentage upside/downside to our target price plus the net dividend yield over the next 12 months. OVERWEIGHT Industry, as defined by the analyst s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months NEUTRAL Industry, as defined by the analyst s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months UNDERWEIGHT Industry, as defined by the analyst s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months This report is intended for information purposes only and has been prepared by Affin Hwang Investment Bank Berhad (14389-U) ( the Company ) based on sources believed to be reliable. However, such sources have not been independently verified by the Company, and as such the Company does not give any guarantee, representation or warranty (express or implied) as to the adequacy, accuracy, reliability or completeness of the information and/or opinion provided or rendered in this report. Facts, information, views and/or opinion presented in this report have not been reviewed by, may not reflect information known to, and may present a differing view expressed by other business units within the Company, including investment banking personnel. Reports issued by the Company, are prepared in accordance with the Company s policies for managing conflicts of interest arising as a result of publication and distribution of investment research reports. Under no circumstances shall the Company, its associates and/or any person related to it be liable in any manner whatsoever for any consequences (including but are not limited to any direct, indirect or consequential losses, loss of profit and damages) arising from the use of or reliance on the information and/or opinion provided or rendered in this report. Any opinions or estimates in this report are that of the Company, as of this date and subject to change without prior notice. Under no circumstances shall this report be construed as an offer to sell or a solicitation of an offer to buy any securities. The Company and/or any of its directors and/or employees may have an interest in the securities mentioned therein. The Company may also make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report. Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not fit to your financial status, risk and return preferences and hence an independent evaluation is essential. Investors are advised to independently evaluate particular investments and strategies and to seek independent financial, legal and other advice on the information and/or opinion contained in this report before investing or participating in any of the securities or investment strategies or transactions discussed in this report. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data. The Company s research, or any portion thereof may not be reprinted, sold or redistributed without the consent of the Company. The Company, is a participant of the Capital Market Development Fund-Bursa Research Scheme, and will receive compensation for the participation. This report is printed and published by: Affin Hwang Investment Bank Berhad (14389-U) A Participating Organisation of Bursa Malaysia Securities Berhad 22nd Floor, Menara Boustead, 69, Jalan Raja Chulan, 52 Kuala Lumpur, Malaysia. T : F : research@affinhwang.com Page 15 of 15