observatory

Clause 8.20(a) mentions “The loading shall not exceed 25% of the premium/takaful contribution or COI/tabarru’ rate prior to the claims”.

Does it mean if COI (cost of insurance) including expected claims, management fee, and commissions add up to RM100, the maximum chargeable premium is RM125? In other words, profit before tax margin is capped at 20%.

The effect is on one hand BNM discourage unhealthy competitions, but on the other hand it also prevents insurers from reaping excessive profit.

However, PBT margin capped at 20%, or net margin capped at 15% should be acceptable as historically ALIM PBT margin is in the range of 5% to 10% only?

2 months ago

observatory

Central medical claims data platform (Clause 12.2) – Does it benefit insurance IT service providers like Rexit?

Coincidentally, Rexit share price has a run-up right after the policy is published on 29-Feb.

2 months ago

troy88

Allianz is the insurance king of bursa!

2 months ago

sheldon

The run up of the price is perhaps a nice big dividend is in the offing?

2 months ago

moven00

Lagi Sekali ✅👏🏻….

2 months ago

wsb_investor

The 25% is only cost of insurance, over paid claims. Not including any expenses. Any previous IFRS4 / IFRS17 profit margin is not meaningful.

2 months ago

observatory

That means for an expected claim of RM100, premium is capped at RM125. The remaining RM25 (at max) needs to pay off commissions and management fees. Then not much will be left!

In comparison, the general insurance at least offers Allianz a combined ratio of 86%, i.e. underwriting margin is 14%.

2 months ago

wsb_investor

No, there are other loading for commission and expense. Usually commission is fine, since you will incur as you sold, not much variance there, except for outperformance related. Expenses then a different story. Your expense loading might (and usually) insufficient to meet actual expenses. And the 25% margin for medical, is just expected. Medical service will rise by inflation, rapidly. It might be 25% now, then erode to 15% by year end.

2 months ago

observatory

Given such challenge, and BNM's caution in approving premium increase, is medical and health insurance a good business relative to other types of insurance? If not, why do insurers still offer such policies instead of freeing up their capital for other types of insurance business?

2 months ago

troy88

Allianz will move up to RM30 eventually to join the likes of F&N, Dlady, etc in the RM30+ category..

2 months ago

wsb_investor

Essentially, for protection business, insurers will earn a x% of total claims payment. And for Malaysia, medical claims are a lot higher than life claims.

2 months ago

yielder

is medical and health insurance a good business relative to other types of insurance? health insurance is not very profitable I think. Insurer is using it as a lead generator, to try to up-sell investment-linked plan, where they have much higher margin

2 months ago

wsb_investor

Medical insurance by itself (either standalone or rider) is not that profitable (in %) vs other line, e.g. personal accident, life, waiver, CI etc. However, it contributes to the largest absolute amount. e.g. if you have a breakdown of the premium for each components of your investment-linked plan, medical will be > 50% of the total premium.

Unique for medical insurance is the ability to reprice, and higher future profit. Your ILP now could be 40% premium to life (fixed, say 400) and 60% premium to medical. After 10 years, say 3 rounds of repricing, the breakdown could be 400 to life, 1000 to medical. The ability to reprice, essentially also meant, insurers are guaranteed never lost any money in this block of business over the long term.

2 months ago

yielder

wsb that means if I pay $1000 per month for ILP. initially $400 go into medical, $600 to investment. Later, insurer can adjust it, so $800 go to medical & $200 go to investment.
Is that correct? thanks

2 months ago

wsb_investor

technically, yes, you can do that too, but most of the time, after repricing, your total premium will increase, say to 1200 (400 to life, 800 to medical), then to 1600 (400 to life, 1200 to medical) and so on.

2 months ago

troy88

Recent retracement was good time to buy. Long term TP 30+ still intact..

2 months ago

yielder

Heard from insider that 50% of people break the contract, as they cannot afford to continue paying the premium. Then they will get back less than half of their invested amount. I guess that's the most profitable part for the insurer?

2 months ago

wsb_investor

It could be true that maybe 20% people lapse the contract in first year (in this year), and probably get back less than half of initial premium paid. I don't think it will over 50%, even the most lousy tier 3 insurers also have better persistency. And no, insurers do not profit from this. BNM actually prohibits insurers to profit in this manner. Agents that "profit" from it, even if a whole life ILP only lasts for one year, the first year ~40% commission still need to pay to agents.

2 months ago

yielder

wsb how is the refund calculated? if i've invested 100k, then got retrenched & need to stop the policy. do I get back 100k minus agent commission? I think there's a penalty. Do you know how much is that?

2 months ago

wsb_investor

Exact % varies by product, but in most case, you will not able to get back any commission paid, and some expenses incurred (typically relatively negligible, except for small ticket size policy).

2 months ago

yielder

wsb if allianz were to redeem it's preference share. is it 1 pref share to 1 common share ratio? I found here, but not too sure. https://www.allianz.com.my/content/dam/onemarketing/azmb/wwwallianzcommy/pdf/investor-updates/2011/RightsofICPSHolder.pdf

2 months ago

wsb_investor

OCBC takes Great Eastern private @ S$25.60 per share, last traded price of S$18.70, embedded value per share = S$36.59.

1 month ago

observatory

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?

1 month ago

wsb_investor

筹资跨足电影业
大马保险代理Norman Pang
明年新加坡上市

1 month ago

wsb_investor

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.

1 month ago

observatory

Thanks for your input.

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.

1 month ago

troy88

On track to slowly climb to eventually reach RM30+ level..

1 month ago

henghua

Based on NTA of RM28.88, it’s not impossible and surprising. It’s a matter of time. Just be patient and wait.

1 month ago

wsb_investor

Diluted NTA is just RM14.85.
While it is possible to reach RM30, probably won't happen in 3 years time. RM25 probably max for this year.

1 month ago

Papayashot

For IFRS17, will the bond yield fluctuation (which would cause unrealized gain/lost in bonds hold) be factored while calculating the net profit?

What is the impact of the current elevated Malaysia bond yield (as compared to covid time) to an insurance company?

1 month ago

wsb_investor

Yes, but less volatile vs pre IFRS17.

Short term, negative impact to capital, might reduce ability to pay dividend etc. Long term, higher yield will have positive impact to future profit.

1 month ago

observatory

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.

So who is right?

1 month ago

observatory

2024 first interim dividend has reduced by 16%

1 month ago

wsb_investor

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.

1 month ago

observatory

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.

1 month ago

troy88

Uptrend still intact to eventually join the RM30+ elite group..

1 month ago

observatory

@wsb_investor,

I looked up the last 12 month results of a few Bursa insurers.

Company, Net Profit, Latest Equity, ROE
MNRB, 428m, 1334m, 3%
Manulife, 77m, 1270m, 6%
Allianz, 731m, 5141m, 14%
LPI, 341m, 2211m, 15%
STMKB, 347m, 1679m, 21%

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?

Any idea?

1 month ago

wsb_investor

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.

1 month ago

mesoan

wsb_investor please share how 3X ILP is calculated?

1 month ago

wsb_investor

just a hypothetical number, could be 3x 5x, could also just be 2x.

1 month ago

wallstreetrookieNEW

@wsb_investor you worked in mgmt at insurance company or were you an actuary?

3 weeks ago

wallstreetrookieNEW

@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.

3 weeks ago

wallstreetrookieNEW

Switch to Allianz

3 weeks ago

wallstreetrookieNEW

Holding both MNRB and Allianz. Not worried at all

3 weeks ago

wallstreetrookieNEW

Entire forum suddenly became quiet. What the heck is wrong with yall

2 weeks ago

wsb_investor

Income Insurance, Allianz in talks on tie-up, seeking regulatory approval

2 weeks ago

observatory

If it goes through, how might it affect Allianz Malaysia?

2 weeks ago

mesoan

@observatory I guess there's no impact. the tie up would benefit the mother company Allianz SE

5 days ago

observatory

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.

1 day ago

wsb_investor

New RBC framework just out yesterday, effectively 2027, but will have immediate impact on product mix starting next year.

20 hours ago