observatory

Why are most Takaful operators loss making? Is it due to lack of scale? I notice the largest player Etiqa and second largest player STMKB are profitable. Or is it due to product nature?

2 months ago

wsb_investor

Etiqa and STMB already exist for very long time, e.g. Etiqa since 1993. Many other takaful operators started in ~2006-2010. In older generation, products are very simple and very profitable, plus companies are not so profit driven yet (also due low low capital requirement back in that era) and no pay dividend etc. For example, Etiqa Takaful has a 2.6bil retained earning, whereas half of other takaful still have less than 100mil retained earning (or even negative). Takaful also operates differently, where there is a shared risk fund. So say for Etiqa, the surplus retained in the risk fund is very big, and they have a lot of flexibility to write new business or suffer loss in a bad year (say medical claims).

2 months ago

Paulina231

Good publicity from Allianz

www.bharian.com.my/sukan/raket/2025/04/1387622/kejohanan-badminton-remaja-allianz-2025-teruskan-peranan-lahirkan-juara

2 months ago

wsb_investor

Prudential Malaysia has done a lot more CSR than Allianz, yet see what happened to Prudential.

2 months ago

x3mg33

63sen dividend not bad

2 months ago

Moratorium

Wah, need to wait for almost 3 more months just to get the dividend...

2 months ago

sheldon

At last, can breathe a sigh of relief!
TQ TQ Management!!!
Noteworthy is that it's labelled "Final Dividend" but for FYE 2024.
Hopefully another generous dividend for 2025.

2 months ago

wsb_investor

Can wait KPJ/IHH Q1 and HY results, to estimate impact on medical repricing cap. See if any sign in flatten revenue for private hospitals, or spiking revenue, as a proxy for profitability of health business for Allianz.

2 months ago

observatory

During the weekend The Edge wrote about medical insurance premium, faulting the insurance industry with the following reasons.

First, medical policies are usually sold together with life policies (as riders), i.e. as a single bundled package. The insurers therefore should not view the sustainability of medical insurance on stand alone basis. They should view both life and medical as a pool, since this is the way that they sell their bundles. The sustainability is a matter of internal allocation/ cross subsidy (between life and medical).

Besides, The Edge looked at ISM data in 2015, 2019 and 2023. The medical claims payout always exceeded medical premium collected. It therefore concluded that it was not a new phenomenon that medical premium had fallen short. It was taken as evidence that insurers had been practicing internal allocation/ cross subsidy all along.

Why do they only complain now?

2 months ago

observatory

Second, the article claims that sales of life and medical insurance gained tractions in 1990s and 2000s due to tax deductibility. During that time, majority (57%) of policyholders were 25-45 years of age. Median policyholder was 35 years old. There was a long period where “excess” premiums were collected from these young policyholders.

It’s expected that as those younger policyholders become older and claims increased, underwriting profits in earlier years now turned into underwriting losses. But insurance companies already made money from them for many years.

While insurance companies have the right to adjust premium according to the claim experience within each cohort, the article suggests that insurance companies do have a life time responsibility given all their expertise and data. They should not purposely “underprice” the premium when policyholders were young in order to gain market shares; and now trying to correct their own mistakes through excessive repricing.

2 months ago

observatory

This led to the third point on policyholder’s buffet mentality. The article suggests that the fault, at least partially, lies with insurers which offer high annual and lifetime limits. The insurance industry was complacent with long-term risks. It’s the insurers which enabled and encouraged the buffet syndrome in the first place and they must bear the consequences.

2 months ago

wsb_investor

Theedge article is written with way too many technical errors. There is no, and there shouldn't be any cross subsidy between death component and medical component. Loss in medical component now is due to repricing restriction during covid, and delay in repricing (used to be once every 3-5 years). For me, what insurers have done wrong, is the non-stop "promoting" for no annual limit / lifetime limit /cashless etc. Luckily there is fewer cashless product now.

2 months ago

observatory

The article acknowledges that the life and medical are two separate pools. Maybe technically they can’t cross subsidise.
However, it suggests that insurance companies use medical as a loss leader to attract customers. It believes their actuarial experts must have run multiple calculations when designing these bundles. They can tolerate low margin (and now losses) in medical as long as they make back a lot more in life policies.

2 months ago

observatory

It seems to suggest that, if the medical pool has become unsustainable now, insurance companies have a moral obligation to inject capital into the pool given that they have paid out a lot of dividends from high profits in the past.

2 months ago

wsb_investor

Medical business, cumulative has not generated any material positive income to any insurers. Past profit is not from medical business.

That moral obligation is a wrong opinion. Medical coverage is a short term coverage, like fire or motor. It is never meant to be a long term. For example, no one will ever sell a 10y motor insurance. Medical insurance is only seems like a long term coverage, but it is either a yearly renewal (standalone product), or non guarantee cost of insurance charge (for ILP).

2 months ago

Paulina231

@wsb_investor. Prudential passes the costs on to consumers who buy insurance ? 😁

2 months ago

wsb_investor

not bad results. not as bad as initially expected. sales drop thou, but that wont be observable immediately.

1 month ago

Papayashot

hi wsb_investor, how come allianz life business profit can increase, even though the premium hike is capped?

1 month ago

wsb_investor

CSM will as buffer to absorb future variance. Only current variance will impact current period profit. For current period profit, key component is still release of CSM and RA, which largely unchanged. Secondary impact will only be observable in the future.

1 month ago

observatory

I notice that both 1Q25 life insurance revenue, and 1Q25 claims & benefits increased 15% YoY. So revenue is keeping up with the claims. At least for now. It was reported previously that Allianz repriced its medical policies last year. Maybe that help. Maybe impact on profitability will be more apparent in the next 1-2 years, assuming claims cannot be contained?

1 month ago

observatory

However, the bad publicity has soured market sentiment and affected industry sales, though less impacts on Allianz. Note 2 of Slide 8 mentions "New business value was RM96.3 million, decreased by 6.4% compared to the period ended 31 March 2024 due to lower sales partially offset by lower expense overrun.
Local regulatory interim measure has posed negative market sentiment and sales challenges to medical plans in the market."

1 month ago

observatory

One quarter of negative NBV growth is not an issue. However, I wonder if longer term NBV growth could become lower if the headwind continues. The life insurance valuation can be expressed as embedded value + multiple * NBV. If long term growth rate is lower, the multiple should be lower too. Many insurers are un fact valued at less than 1 time Price to Embedded Value.

1 month ago

wsb_investor

Insurers will find a way. ILP with medical rider is not the only product that can sell. Funny thing is, very likely insurers will focus to tackle HNW clients, instead of continue focus on mass market ILP. Competition might be lesser, and in the future, ILP with medical rider will not be cheap anymore (yes, it is very cheap now, consider industry wide, medical loss ratio is 100%, no one is really profit much from medical insurance).

HNW products currently also have some issues:
1. uncertainty in global equity market
2. products offering not very attractive, where it is better for rich clients to invest in ETF directly (some form of guarantee need to be provided, e.g. capital protection (with lower upside gain). However, local insurers might not yet have the ability to do so (e.g. require support from local IB, not sure if allow to deal extensively with foreign IB).

1 month ago

wsb_investor

In 2019, agency ANP = 76.3%, in Q1 2025, agency ANP = 49.3%. Similar trend for all top life insurers in Malaysia, and also similar trend for HK/SG market, where agency slowly lost the influence, and banca/FA (which mainly serve the rich) dominate the market.

MoF and MoH clearly don't know what they are doing. Yes, MoH has a big financial burden, but forcing private insurers to absorb all the reasonable losses, and all the drama to protect the rakyat, will just make insurers move away from medical insurance. Insurers have been struggling to have double digit growth, 2018-2023, industry CAGR is only 5.5%. Now, with a single decision, life insurance industry has a negative growth of 9.6% (bringing it 2 years backward).

1 month ago

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1 month ago

wsb_investor

KPJ has a drop in revenue (vs q4), IHH has a flat revenue. Good for Allianz.

1 month ago

wsb_investor

Indonesia just announced mandatory copayment for all private health insurance (without mention clearly for existing/renewal/new policyholders). Singapore and Thailand already have similar mandatory copayment (however, no material long term medical plan in these 2 countries). Development in Indonesia is very interesting because it is the only country similar with Malaysia, with medical rider attached to a long term plan. Very likely, eventually Malaysia will follow suit on this mandatory copayment, just not sure if now (under current administration, which I have no faith on), or next administration after GE16.

1 month ago

Paulina231

Private healthcare costs have skyrocketed amid soaring medical inflation in Malaysia, and spikes in premiums for medical insurance have resulted in public outcry and prompted the central bank to step in 😯

1 month ago

wsb_investor

Many factors that lead to medical inflation, including aging, medical advancement, greed in private healthcare and people now afraid to die. Hence a copayment is a right direction. If you not going to fork out 100k yourself for a 1mil medical bill (regardless if necessary or not), then you shouldn't expect the insurance pool to share your medical cost. Same logic should also apply on public healthcare. B40 will not appreciate the RM1 healthcare. They will continue to be obese, smoke, not exercise etc. and enjoy the free healthcare. A simple mandatory payment, like RM10 for outpatient and RM500 for inpatient can immediate change the B40 mindset. However, Anwar got 0 political will to do so, and Anwar execution ability is extremely pathetic (e.g. the recent delay in e-invoice, the ron95 subsidy implementation etc.).

1 month ago

sheldon

Any idea as to who is the is a big player selling preference shares at a discount & why?

1 month ago

wsb_investor

Very interesting free fair value valuation from Great Eastern on Allianz Malaysia. For Allianz, P/CE = 0.8x (self calculated, not in the report, market around 1.0x). P/NAV = 1.15x (adjusted with PA, market average 1.0x), P/E = 8.6x (adjusted with PA, market average 10.7x) https://links.sgx.com/FileOpen/20250606%20-%20Joint%20Announcement.FINAL.ashx?App=Announcement&FileID=848203

4 weeks ago

wsb_investor

TBH, in my opinion, only P/EV has actual value, which is not exactly disclosure and not able to capture GI business well. P/CE is a simplified attempt to replace P/EV. P/NAV and P/E are useless for insurance companies. Anyways, can sense that life insurance valuation, which previously decline significantly across the world, is now coming back.

4 weeks ago

observatory

During AGM, Allianz CFO said “the combined amount of (net) CSM and equity would be the value to shareholders which is comparable to the embedded value.”
His words suggest that net CSM + ALIM’s shareholders’ equity is roughly the same as life EV. Perhaps larger by a bit, but not much. Otherwise they should not be called “comparable”.

4 weeks ago

observatory

RHB currently values the life business at 0.4X P/CE. Previously, it used to be 1.0X P/EV.

4 weeks ago

wsb_investor

FWD finally will have its IPO, HKD 38 per share, EV = ~HKD 34 per share. Price/EV ~ 110%

1 week ago

wsb_investor

Price/CE (based on above formula) ~60%

1 week ago

observatory

Interesting. Your calculation shows the EV and Comprehensive Equity can differ greatly. Could it be that different types of life insurers have very different EV to CE ratio. As I understand FWD is a relatively young company.

1 week ago

wsb_investor

IFRS17 you don't have to load full expenses, only the attributable part. Under EV, it is different. For a young company like FWD, the attributable and full expenses can different a lot, e.g. argue that most expenses incurred now should be attribute to future, instead of existing policies.

1 week ago

wsb_investor

FWD business concept, buy a poorly managed local company, incorporate FWD own centralised IT, double or triple the sales in a short time. Total Asia, FWD APE in 2015 = 1/7 of AIA, in 2023 = 53% of AIA.

1 week ago

wsb_investor

^typo, south east asia only

1 week ago

observatory

Wah, FWD grows so fast. How did it achieve that? Would FWD become a threat to Allianz in Malaysia?

1 week ago

wsb_investor

According to prospectus, FWD ranked #9 in Malaysia (Conventional + Takaful combined), below GE, Prudential, AIA, Etiqa, Allianz, HLA, Sunlife and Tokio Marine. Another noticeable player that expanding agency currently is Generali. FWD Conventional indeed also expanding agency, but sales yet to pick up materially. FWD Takaful is much bigger than FWD Conventional.

Generali and FWD have to overtake Sunlife and Tokio Marine first (both heavily on banca, lesser on agency), before become a threat to Allianz.

1 week ago

andr

Other insurance companies pale in comparison to ALLIANZ when it comes to revenue performance, growth consistancy and value (way better than Takaful).

4 days ago

wsb_investor

Allianz (Life) has just crossed the point to have meaningful scale. Next couple years will be sweetspot for Allianz, before stagnant after another 10 years.

4 days ago

observatory

By meaningful scale, do you refer to the fact that Allianz Life has been returning more cash to shareholders since two years ago, given that it doesn't need to keep all those cash to fund business expansion. But why these sweet spot will disappear when it becomes even larger? I notice in banking large banks like Maybank, Public Bank, DBS, JP Morgan are all very profitable, outperforming most of their smaller peers. Doesn't that apply to insurance too?

3 days ago

wsb_investor

Assume nothing change, there is just so much people that will buy life/health insurance voluntarily. Same for like motor insurance, where the ceiling is capped by number of vehicles on road. I never really believe those that tap into takaful and can expand penetration and sales.

Biggest catalyst for Allianz is still external factor, like any change in public healthcare financing.

3 days ago

observatory

The insurance industry likes to say that as a nation becomes a developed country its life insurance penetration will increase too. East Asian developed economies are particularly fond of life insurance. Putting aside HK with 15%-20% penetration rate (data is probably skewed by mainland China clients), various sources show that Taiwan’s penetration is about 10% and Singapore is high single digit.

According to Allianz presentation, Malaysia's penetration in 2024 is at 3.4%. That implies a lot of room to catch up as both GDP and penetration rate increase, assuming we go the way of HK, Taiwan and Singapore.

Is this a reliable rule? Or HK, Taiwan and Singapore unique because they have strong agency culture?

2 days ago

speakup

Msia low cos b40 nak kerajaan kasi free medical fees

2 days ago

wsb_investor

HK/Taiwan/Singapore mainly with saving oriented products (big ticket big volume), that low profit margin and come with high risk (e.g. product with min 2% return, yet enjoy equity exposure). Those "investment" classified as insurance, and appear as high insurance penetration got zero meaning. FWD IPO there also show that Thailand actually has a reducing insurance penetration (NB), and is because their stop selling saving product.

1 day ago

wsb_investor

FWD price hold steadily at $38, which is a good sign. All 3 AIA/PRU/FWD now trade at above 1 P/EV. Valuation for life insurance is back.

1 day ago