So last traded price is 0.5X EV. Privatisation offer is 0.7X EV. But if assumptions in the EV methodology are broadly correct, rightfully the net present value of future profits should be roughly the same as the EV, even if there no more new business, right? Was the market being too pessimistic with Great Eastern, or there are hidden risk in the EV assumptions?
If not mistaken, great eastern adopts a very aggressive method to calculate future profit from medical business, something like always reprice 10% annually hence the Pv profit can become very unrealistic (in my view). However, not sure how the normal retail shareholders view it, since they won't have such info.
Using today closing price, Allianz total market cap is RM7,694m.
Based on Maybank's input, the Jun 2023 general insurance equity is RM2.5b, and life insurance EV is RM3.5b.
Working backward, assume 1.4X book value for the GI business, the implied value of life business = RM7,694m – RM2.6b*1.4 = RM4,194m, or 4194/3500 = 1.2X EV
I hope Allianz EV methodology is conservative and prudent.
The Edge covers the privatization offer for Great Eastern Holdings (GEH). There are a number of interesting points.
0.7X P/EV is the cheapest acquisition in Singapore in 20 years.
The second cheapest is 2021 HSBC’s acquisition of Axa Singapore life business at 0.8X (incidentally, HSBC Malaysia is Allianz Malaysia banca partner)
GEH was traded at 0.5X P/EV before the acquisition offer. I might be wrong, but I suspect one reason for the low valuation was the low liquidity prior to the offer. OCBC already controlled 89% and a few other shareholders are long term investors like Sg Bagan. Sometimes only a few thousand shares traded in a day. Similar situation to Allianz just not long ago.
While OCBC moves further towards a financial supermarket model that include banking and insurance, DBS and UOB believe otherwise as they believe insurance “manufacturing” and distribution require different core competences.
If I look at Malaysia, our largest bank Maybank owns Etiqa and until now has no plan to float it. A looser arrangement is Hong Leong Bank distributing for HLA which is sister company.
No right or wrong. But need to know product strategy and maximise bancassurance channel. Etiqa as example, become top 6 purely with bancassurance, but another Tokio Marine, struggle to have meaningful market share with RHB bancassurance. HLA got mix of agency and banca, not sure with the split.
Berkshire Hathaway announced it has acquired 6% of Chubb.
The EPS has climbed from $10 in 2016 to $22.5 in 2023, a CAGR of 12%. But despite share price increase, Chubb is currently priced at 12X forward PE. The valuation looks reasonable even though it was said that good years might have peaked.
Next I looked up Allianz SE, the forward PE is only 10-11X. Dividend yield is above 5%.
Although developed countries may have slower growth rate, but matured market may enjoy higher valuation. These two large insurers don't look expensive if compared with Malaysian counterparts.
They are in different sub-segments - P&C, life, or both; some conventional, some Takaful. But regardless of sub-segment, ROE measures how efficient the company is in deploying shareholder capital.
Not too surprised to find that Allianz and LPI are “better” than MNRB and Manulife.
But STMKB remains a puzzle. Post IFRS17, ROE declined a bit, but still above 20%, the highest among peers.
Is STMKB really the most efficient insurer when it comes to the use of shareholder equity? Do takaful operators need lesser capital as compared with conventional?
In fact, in a way yes, for single premium product, there is 0 capital upfront. For ILP (regardless if conventional or takaful), there will be a strain, and a limit of how much can sell at a point.
So, in theory, say if we got 1.4bil population, STMB can immediately sell 45x of MRTA, but Allianz probably can only sell 3x of ILP before being restricted by the capital.
However, this is not meaningful at all. And similarly focus on ROE is not meaningful as well. MRTA is good, profitable business, but in the end, still restricted by how many new house loan by your bank partner.
@observatory you are a very pro investor indeed. But you got one thing wrong: Some insurance companies have low ROE due to their riskier underwriting and markdown on investments. Especially re-insurers. So let's say you have one year of higher claims and cat losses, the combined ratio will shoot up, and ROE stays flat if investment returns also remain flat.
800k of ICPS have just been converted into ordinary shares.
ICPS provides 20% extra dividend but harder to sell. For 800k volume, if they cannot be sold in blocks, it’s better to convert into ordinary shares rather than sold at a discount to ordinary shares.
Based on shareholding information, I guess the shareholder is either EPF, or one of the Public or AHAM funds.
Many hoo-ha with co-payment medical insurance recently. Insurers are already moving away from cashless, yet some doctor association/consumer group jump out and said, cashless is better. Many people don't see the point that, the saving in premium, will higher than the deductible in just 2-3 years time. You might need to fork out RM500 or RM1000 for admission, but you save back premium (and hidden commission) in 2-3 years. There is no free lunch, for everyone, but dropping the cashless feature, will introduce a great saving immediately.
For many white collar office job, you (and maybe your family) already covered by your employer's group insurance. There is no real need for you to have a cashless medical insurance.
Allianz has announced a pre-conditional voluntary cash general offer to acquire at least 51% of the shares of Income Insurance, subject to regulatory approval. Allianz intends to offer $40.58 per share for a total transaction value of approximately $2.2 billion (approximately EUR 1.5 billion) for 51% of the shares in Income Insurance. The offer price represents a premium over Income's NAV of $29.55 per share of 37.3%.
If my understanding is correct, Allianz will loan out its internal staff (under a single entity), as shared service to other BUs, and get to profit from it. A more common way is, shared service will operate as a separated entity (might or might not under local BU, typically not under local BU, but directly under Group).
I see. Maybe for non-IT staffs. For IT they transferred the majority of Malaysian staffs to the new regional delivery center Allianz Technology Sdn Bhd
Only after reading yesterday news that I realize Prudential parent company owns just 51% * 50.99% = 26% of Prudential Assurance Malaysia Bhd. If Prudential can’t obtain greater control as per Federal Court’s decision, wouldn’t it discourage Prudential from growing its Malaysian market? How would Prudential agents react?
No,Pru plc owns 51% of PAMB. If bumi proxy can just anyhow songlap foreigner share, I think discourage Prudential from growing MY market is the least concern.
Before 1998, Pru plc owned 30% of PAMB, Berjaya owned ~69%. In 1998, Berjaya divested in PAMB, and supposedly sold all ownership back to Pru plc. However due to insurance act 1996, Pru plc cannot, on paper, own 100%, hence the Detik Ria (30% @ 1998) as bumi proxy. Vincent Tan personally also hold 19% of PAMB share at this point, only later (unknown when), sold the 19% to Detik Ria. Pru plc has signed some put and call options on the ownership of Detik Ria (i.e. fixed price) that it will repurchase back the ownership at later time.
Later in ~2017, BNM (or government) started to want to enforce the foreign ownership (now 70%), Pru plc then planned to get back the 49% and then disinvest accordingly. This Tommy, used the excuse that not getting MoF approval, but ignoring that BNM has given the approval. Next time how? listen to who? MoF or BNM?
Who is enforcing the 70%? BNM. From the article, BNM also ok with Pru plc approach, to get back 100% of share, and proceed with disinvestment accordingly. Then suddenly, VT and Tommy, come out with this idea, to songlap Pru plc ownership.
Prudential is not the only company that foreign owns 100% via bumi proxy. GE has gotten exemption. AIA has approval from white house, probably no one dare to touch. HLA and Etiqa are local. Allianz/Manulife are listed. Sunlife/MCIS/Generali/FWD/AmMetlife all have local partner. Zurich and Tokio Marine probably still 100% foreigner own, with proxy.
Comments on AMIB report: i. mandatory coinsurance, on long term, is good for everyone (except private hospitals) ii. market risk charge under RBC2 will be higher, yes, but overall risk charges might not be higher. Also, comparing CAR change from RBC to RBC2 is completely meaningless. There are new risk charges (or new components), but there are also diversification.
Allianz's proposed acquisition of a 51% stake in Singapore's Income Insurance for US$1.6bn has been called off after the Singapore government intervened, stating the merger "would not be in the public interest."
Allianz is currently priced at around 1x BV for GI, and 1x CSM + NAV for Life. PBB is offering to takeover LPI @ ~1.74x BV. In Singapore, Allianz offers to takeover NTUC @ 100% EV (failed), GE offers to privatise @ ~70% EV (not going well). Regionally, Prudential and AIA are still trading at near record low, and FWD IPO still keep delaying due to weak market sentiment. If GI is fully priced (based on Lonpac 1.74x), share price should be ~28. If both Life and GI is fully priced (based on pre-covid era, life insurance valuation), share price should be ~40.
Allianz FY2023 total expense is ~650mil, while PBT is 957mil. I understand that Allianz is currently undergoing some cost saving measure, say if materialise, a 10% cut in expense, can increase PBT by 6.8%.
Immediate catalyst will depend on Anwar's healthcare reform. Currently, Malaysia healthcare expenditure is ~50bil, of which 17% by private insurance (~8.5bil). Allianz has ~1.5-2bil/yearly (and rising, with loss ratio ~80-90%) in medical premium/COI alone (>17% market share). Anwar is pushing for rakan-KKM/FPP in government hospital, and supposedly in his ideal world, only B40 can enjoy RM1 healthcare, in the crowded government hospital. M40 can go for full pay gov hospital, and T20 can go private hospital. A lot room for medical insurance, if Anwar's plan success, of course, at the expenses of rakyat, and make greedy private investors richer.
GI last 12-month ROE was about 16%. If sustainable, a 1.7x P/B multiple similar to LPI is fair. The GI valuation will be RM2,611m * 1.7 = RM4,439m
I’m not sure about the fair multiple for life business. Net CSM + tangible shareholder equity = RM4,497m. Market leader AIA which has high growth rate in new business value, is currently traded at 1.3X EV (~62/48). Shouldn't Allianz Life be valued at a discount to AIA?
I compared AIA MY and Allianz MY NB growth, Allianz is marginally higher than AIA for 2023 vs 2022, and 2023 vs 2019. Anyways AIA HK covers too many markets, and hard to put value on them, vs Allianz MY is a lot more simple.
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Posted by wsb_investor > 2024-05-10 14:57 | Report Abuse
OCBC takes Great Eastern private @ S$25.60 per share, last traded price of S$18.70, embedded value per share = S$36.59.