Codeblue reported many health reform initiatives by Anwar, supposedly effective next year.

If success, a significant health cost will transfer to M40/T20, great demand for health insurance. Only 7.5% of health financing currently from insurance, 46% from gov, 34% from private out-of-pocket.

If fail, like the recent lack of manpower in government hospital, government will have to transfer patients to private hospital (New Madani Medical Scheme), good for KPJ/IHH. And if the chaos persists, heath insurance demand might also increase.

Honestly, personally opinion, any form of heath reform going to be a chaos, like in many other countries.

if based on forward looking PE (10x), the fair value is RM2

Many news related to inflation today, which actually good for running medical insurance, since insurance profit is on a fixed margin% (long term view).

Vet through all the takaful companies H1 report, only STMB and another recorded a drop in equity upon transition. Looking at the number, STMB probably has the economic of scale vs many others Takaful (not conventional) , but its profit confirm will on downwards trend over the next 3 years.

There are some Takaful products, where the policyholders do not participate in risk sharing. Surplus in risk fund will be shared between shareholders and charity. This is the type of products that very hard to fulfill VFA requirements.

Crossed check with Etiqa financial statement, my understanding probably just 70% right, but is definitely related to investment service result for GMM.

GMM = general measurement model, default model for IFRS17, it assumes company owns all the assets backing liabilities, where it is not the case for investment linked and takaful.
Hence for investment linked, it will usually be another model (VFA), and for takaful, most of the products will be VFA. If one measures ILP or takaful with GMM, the results will definitely be weird and not reflective of actual economics.

There are multiple funds under STMB (life risk fund, GI risk fund, ILP unit funds etc.), economically only investment return in shareholder fund belongs to STMB. However, since MRTA is measured under GMM, risk fund for MRTA likely "classified" as shareholder fund under IFRS17 (but not economically), and hence higher investment return vs IFRS4. Not sure, need wait for full year end report to understand.

Under IFRS4:
investment income = 44mil (attributable to shareholder only), 138mil (total), 32%
This is more representative, but then, SHF typically invested in bonds, unit funds typically in equities, so investment income doesn't represent anything, still very subjecting to market movement.

There is a possibility that SMTB is stating higher transition CSM (with FVA approach), than what it supposed to have if assumed IFRS17 always exists (FRA approach). With the fast release, there might not be any CSM growth. Growth in CSM release doesn't indicate growth in CSM balance. Without any new business, CSM release will converging to 100% (100% in final policy year, ~50% before final policy year).

Nothing is static yet, number will still change, STMB tweaked down the transition CSM by 7%, in Q2. Most likely will continue play with the number to come out with a more balance P/L.
What's weird is the investment service, amount that attributable to shareholder by right should be consistent.
I will guess that investment income from assets backing GMM block (MRTA), is now also classified as attributable to shareholder, which seems weird because economically it doesn't work that way.
If purely look at insurance service, P/L in IFRS4 = 184, P/L in IFRS17 = 137, still a 25% drop.

STMB H2 2022 (IFRS4)
PBT = 228mil
PAT = 156mil
Breakdown of PBT:
Surplus (recurring) = 18mil (note 24)
Wakalah fee = 566mil
Comm/ME = 400mil
*Wakalah fee - Comm/ME = one-off, will defer under IFRS17
investment income = 44mil (attributable to shareholder only), 138mil (total, not relevant in P/L)

STMB H2 2022 (IFRS17)
PBT = 210mil
PAT = 142mil
Breakdown of PBT:
Insurance service = 137mil (CSM release 109mil, RA release 17mil)
Investment service = 70mil (Investment income 125mil (total), finance exp -55mil)
Other income = 3mil

Equity/CSM
IFRS4 Dec 2022 Equity = 2019mil
IFRS17 Dec 2022 Equity = 1443mil (-576mil) in Q2 FS restated again after Q1
IFRS17 Dec 2022 Equity = 1380mil (-639mil) in Q1 FS
Transition CSM = 1035mil in Q2 FS
Transition CSM = 1117mil in Q2 FS
^CSM release (6 months) = 109, CSM release rate (annual) ~ 19% (vs Allianz = 12%)

For comparison, Allianz Equity
IFRS4 = 4230mil
IFRS17 = 4677mil

Unlikely Conventional, Takaful P/L is much clearer under IFRS4.
Real income is mainly 3 components, wakalah fee (net expenses) 166mil, inv income 44mil and surplus sharing (bonus) of 18mil.
By setting a high CSM (at the expense of lower equity), STMB can then maintain the same yearly P/L.

*~30% of Family business and ~95% of General takaful measured under PAA (measurement model that has minimal impact under IFRS17), but seems like these business has minimal contribution to P/L anyways (pre and post IFRS17), key source of earning is still MRTA and ILP

all analyst coverage just quote ifrs17 to ifrs17 impact, no one really go compare ifrs4 to ifrs17 impact yet.

218/163 = 134%, basically going forward, post Ifrs17, life segment will continue to report a much higher, and stable P&L

6M 2022: PBT 76mil, core profit 163mil, IFRS17 218mil
6M 2022: IFRS17 195mil

KUALA LUMPUR: Allianz Malaysia Bhd's net profit increased by 11 per cent to RM166.67 million for the second quarter ended June 30, 2023 from RM150.08 million registered a year ago, due to its life insurance segment.

Revenue rose to RM1.16 billion from RM1.08 billion in 2022, the company said in a filing to Bursa Malaysia today.

In the first half to June 30, Allianz Malaysia posted a net profit of RM339.4 million, up 12.9 per cent from RM300.6 million. Revenue rose 8.4 per cent to RM2.3 billion versus RM2.1 billion last year.

The Asian business of global insurer Allianz has recorded an operating profit of EUR370m ($403m) in the first half of this year, 18% higher than the corresponding period in 2022.

Life & Health operating profit in Asia increased by 22% to EUR299m, driven largely by profit increases in Indonesia and Taiwan.

Really day day up, weird

who goreng this stock?

US is too extreme case, where there is no single price for everything. In Malaysia, I think there is still single price for everything, but insurers will also negotiate discount, e.g. room & board RM200, insurers get 10% discount.

Cashless admission and even claim and reimburse later, will definitely lead to unnecessary procedures than self funded cash admission.

almost day day up, GE takeover Ammetlife as catalyst? heard medical repricing soon as well.

all time high again wah

all time high now

You need real expertise to manage insurance, which is much harder to understand than banking. ALM in insurance is like decades ahead of banking.

Then there are also evolving development with treatment for Participating fund, where insurers will require experience from UK as well, e.g. recently on estate treatment.

Malaysia is lucky to have BNM, which shamelessly just copy regulation from Singapore and UK (which actually is very good and smart way as a regulator), and also less political interference in insurance development (except the 70% ownership thing). For comparison, insurance regulation in Indonesia/Vietnam/India are really lax, with loopholes etc.

Oh, and Malaysia has slowly became a global outsourcing center for insurance talents. Berkshire Hathaway and Cigna both have operation office here in KL, despite not selling any business in Malaysia.

Unit fund (subject to market movement, new business, lapse, withdrawal):
Prudential YE2022, 22.0bil, up from 21.1bil (+0.9bil, +4.3%)
GE YE2022, 12.6bil, up from 11.7bil (+0.9bil, +7.2%)
AIA HY2022, 12.5bil, up from 12.5bil (no change)
HLA HY2022, 4.83bil, up from 4.35bil (+0.5bil, +11%)
Allianz YE2022, 3.2bil, up from 2.7bil (+0.5bil, +18.5%)
Etiqa YE2022, 2.44bil, up from 2.37bil (+0.07bil, +2.95%)

Allianz currently with highest growth in ILP, Allianz used to be very aggressively selling ILP pre-covid. For a standard ILP (with medical rider), it will beat all competitor quote, but actually by giving a lower sustainability (age 70), instead of 100. However, AIA and Prudential have already follow the same pricing method, to quote premium up to age 70 to retain market share.

Now, the key focus is actually HNW ILP (sum assured 1mil+), mass market ILP with medical is not the sole key focus anymore.

2022 NB APE, Allianz Life = 5x of AmMetlife
Unlikely Allianz heavily on ILP, AmMetlife products heavily on regular premium conventional (high cost of capital) and group insurance (annual renewable).

Assets: Allianz Life = 4x of AmMetlife
Premium: Allianz Life = 6x of AmMetlife
Claims: Allianz Life = 6x of AmMetlife
IFRS4 profit: Allianz Life = 2.6x of AmMetlife
ILP unit fund: Allianz Life = 16x of AmMetlife

AmMetlife = 1.1bil MYR

it really depends on product type, there are products that insurers will profit from early surrender (e.g. Y3/Y4), typical all non-ILP, there are also some that insurers will loss from early surrender, typically ILP. BNM got a rule that penalty can only apply up to a level where insurer can recoup back upfront cost, but this typically only for Par saving plan. Due to competition, there is usually no such penalty for protection ILP (except for those saving type ILP).

definitely less than half, probably already more than half policyholders drop off in first 5 years. it depends on the product type, for some, say protection type ILP, early lapse will forfeit future profit (company don't really earn much in first 5 years for ILP, due to lower premium, high commission). total commission in first 6 years ~200% of total premium, plus about 300-400 fixed expenses per policy sold. ILP typically will have negative cashflows to the company in first 1-2 years, and any lapse in this period, will lead to actual loss, on top of forfeiting future profit.

If not mistaken, the 2% is always there, to illustrate to policyholders a low return scenario, but the 5% previously was historical return/expected return, which much higher than 5% (it was 9% in my policy document, 100% equity fund).

There is already nothing wrong here, there is a best estimate scenario, and a low return scenario.
However, due to numerous complaints, and the continuously underperforming KLCI (5Y FBM100 return is now -20%), BNM finally instructed insurers to show 5% return only.

Singapore had similar issue and took similar initiative as well, and they use 4.25%.
https://www.lia.org.sg/tools-and-resources/illustrated-investment-rate-of-return-for-par-policies/

It used to be like each companies will use own historical return to project the future return for ILP/Par saving, but now is regulated to 2%/5% (if not mistaken).

To be fair, KLCI has been performing very badly, especially since 2018, and ILP/Par invested heavily in KLCI. You can't really blame insurers for not able to achieve projected return.

*there are limitation on how much local insurers are allowed to invest overseas (8% I think), however, heavily invested in overseas also not a good idea.
https://www.bloomberg.com/news/articles/2023-07-26/us-rate-hikes-haunt-taiwan-s-1-trillion-life-insurance-industry

AGM QA:
In the Life segment, growth plays a vital role as it brings in NBV for Allianz Life. The term "Coming of Age" refers to the point at which Allianz Life's business reaches maturity and that the in-force profit on the life business will continue to emerge. Subject to meeting regulatory solvency requirements, the Management aspires to elevate performance and enhance dividend payments.

Insurance is probably more regulated than the banks in Malaysia (and all other advanced regions).
Everything from pricing to commission to illustration to policy wording, all required approval from BNM.

PETALING JAYA: Singapore insurer Great Eastern Holdings Ltd is reportedly in talks to buy MetLife Inc’s Malaysian venture, according to people familiar with the matter.

The subsidiary of Oversea-Chinese Banking Corporation (OCBC) is conducting due diligence on AmMetLife Insurance Bhd and seeking regulatory approval to clinch the deal, the people said.

A transaction could value AmMetLife, which US-based MetLife jointly owns with Kuala Lumpur-listed AMMB Holdings Bhd, at between US$250 million (RM1.12 billion) and US$300 million (RM1.34 billion), the people said.

https://www.prudentialplc.com/~/media/Files/P/Prudential-V13/news-releases/2023/ifrs17-briefing-presentation.pdf

Prudential IFRS17 investor presentation shows a clearer picture on IFRS17 impact on different countries/regions (probably the first that publicly available).
Typically, insurance has a very heavy investment elements in advanced countries/regions (e.g. UK, EU, HK), which IFRS17 impact on profit is negative, but insurance with very high protection elements, IFRS17 impact will be positive (exclude single premium).
You can observe very high positive IFRS17 impact in Indonesia (+50%) and Malaysia (+33%).
For Singapore, which insurance is usually sold as investment, suspect is due to Prudential Sg's Medical Shield business, not familiar with business split of Prudential Sg.

record high 15.8 for Allianz-PA, but low volume.

satisfied with their 20+% return in 2 years time already ba?

州选后若重呈医改 国民健保料成重头戏 https://www.sinchew.com.my/20230704/%e5%9b%bd%e6%b0%91%e5%81%a5%e4%bf%9d%e6%96%99%e6%88%90%e9%87%8d%e5%a4%b4%e6%88%8f/

AGM slide:
https://www.allianz.com.my/content/dam/onemarketing/azmb/wwwallianzcommy/pdf/investor-updates/2023/Annexure1_49thAGMPresentation.pdf

You still can't stop if the board/management wants to pro-US, e.g. in the case of HSBC vs Huawei.

Fire and PA business (or any high severity, low probability insurance) are always lucrative (but small premium), regardless if conventional/takaful. In fact, by concept, takaful will be more expensive (to policyholder) and less profitable (to insurer).

In my opinion, not much point for Allianz to explore takaful license. Takaful business will not be profitable in first 5-10 years. Previously BNM allowed for takaful window operation, but now I don't think it is allowed anymore.

Allianz will almost never dispose Allianz Malaysia, as it already hit critical mass. You can observe that insurers that keep changing ownership, e.g. UNIASIA > GBSN > FWD, Tahan > AXA Affin Life > Generali, all are just small players, that struggle to sustain.

Prudential used to talk with KWAP for the 30% issue. Personally I feel KWSP/KWAP/ASNB etc should indeed explore to invest in insurance, even without push from government. We really cannot allow foreigner to control our hospitals and insurance. We need foreign talents, yes, but we must in control. So far, except the 30% issue, BNM/government still has a strong control over insurance companies.

Many secret arrangement (or scandal) between GE/AIA/Pru and our government.
GE donated 2bil in 2018
AIA
https://www.spglobal.com/marketintelligence/en/news-insights/trending/4zrc31t1740qjcfahdm9na2
Prudential
https://theedgemalaysia.com/article/newsbreak-prudential-goes-court-over-stake-malaysian-licensee

Tokio Marine taps Goldman, Jefferies to sell US$1bln Southeast Asia life insurance unit-sources

Prudential just shared on insta that out of 2.04bil claims paid in 2022, medical = 1.46bil (71.6%).

BNM regulate how much dividend is allowed to repatriate overseas, that is why insurance in Malaysia is very well regulated. ILP is a very well designed product, take away investment risk that insurer scare, pass on to policyholder that willing to bear the risk. Almost everyone knows equity is risker, but almost everyone will select equity fund for their ILP policies. If the product is not ILP (say designed as a standalone), then insurers will only invest in fixed income + some equities instead. No special allowance that I aware of.

Of course, again IFRS4 profit is quite meaningless, since you cant see the breakdown.

On the other hands, despite near 220mil profit from investment margin, Prudential annual profit is only 448mil (2022), 739mil (2021), 545mil (2020). Insurance margin (say average of 3 years, minus 220mil = 357mil) for Prudential is barely as much as Allianz (core profit 325mil in 2022, 267mil in 2021), despite much bigger block of business.

Anyways, need to have basic understanding on ILP to judge Allianz ILP fund size.
ILP fund size subject to market movement, if equity price up 10%, then fund size will +10% as well.
Policyholder can withdraw from ILP fund.
Policyholder can stop paying premium for ILP policies.
Allocation into ILP is very low in early years, and increasing after that. (e.g. only ~60% of premium paid will invest into unit funds in Y1, but 100% premium will invest into unit funds in Y11), can google for minimum allocation rate (MAR).
In reality, you will still have COI deduction (and other deduction), after the allocation, say if COI is ~30% premium at Y1, and ~40% premium at Y11 (COI is increasing yearly), net growth in unit fund is ~30% premium in Y1 and ~60% premium in Y11).
Investment margin on unit fund is ~1%-1.2% (Insurers charge policyholder ~1.5% management fee, but net incurred cost is ~0.3%). 3.2bil unit fund converts to 32mil investment margin yearly (and growing).

Actually can look for "Net asset value attributable to unitholders" in financial statement
Prudential YE2022, 22.0bil, up from 21.1bil (+0.9bil, +4.3%)
GE YE2022, 12.6bil, up from 11.7bil (+0.9bil, +7.2%)
AIA HY2022, 12.5bil, up from 12.5bil (no change)
HLA HY2022, 4.83bil, up from 4.35bil (+0.5bil, +11%)
Allianz YE2022, 3.2bil, up from 2.7bil (+0.5bil, +18.5%)
Etiqa YE2022, 2.44bil, up from 2.37bil (+0.07bil, +2.95%)

Surprised, thought GE is half dead on ILP and AIA is promising, but seems like reverse.
Also thought Etiqa is faster growing vs HLA, but it is reverse as well.
But clear winner (growth) is still Allianz.

Insurance management is very unlike banking. For banking, local players can shine easily, and foreign banks are not anyhow better than local banks in Malaysia. Insurance is very different. Many local insurers failed 20 years ago, many Indo/Vietnam/India insurers still fail today, even local GI insurer in Taiwan province almost bankrupt due to covid insurance.

Of course not all foreign insurers are equal, it depends on whether the regional office has any intention to really invest in Malaysia market. You can guess it from the parent company report. E.g. in AIA/Pru, Malaysia is always being mentioned. Allianz occasionally will report Malaysia market. Some other Switzerland/Canada/US/Japan based insurers, Malaysia is never really their focus.

Etiqa GROWTH FUND - 384mil
GROWTH FUND - 1004.5mil

Previously, there will always be a default fund (typically local equity), which agent will just set to 100% for any new customers. Only recently, choices of funds increased, with more "fancy" funds to select, especially for Pru and AIA.

AIA EQUITY PLUS FUND - 3004mil
PRULink Equity Fund - 7612mil
Allianz Life Master Equity Fund - 1237mil

Allianz ILP is popular (and cheaper, on purpose to gain market share previously). In fact, if just look at ILP alone, top 3 players should be AIA, Prudential, Allianz. You can actually get a sense of the "size" of ILP business by summing up all their ILP fund size, is public info.

Growth potential of insurance depends on regulation and economic growth. Malaysia economic growth is almost non existent since 2018, but we have great regulation on insurance.