Posted by wsb_investor > 1 month ago | Report Abuse

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/

Posted by unicornbird > 1 month ago | Report Abuse

wsb good info. I guess when the agent sell the policy, they will always mention the best case scenario. thus creating the mismatch in expectation

Do you have the estimated number of policy holder, who hold life policy till maturity?
I think probably half of policy are dropped due to various issues
this is good for shareholders, as early redemption penalize heavily on policy holder. thus giving us free money

Posted by wsb_investor > 1 month ago | Report Abuse

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.

Posted by unicornbird > 1 month ago | Report Abuse

thanks for the insights, please help to check my understanding

Insurer Loss -- If policyholder cancel policy in first 2 years. Due to commission paid to agents, & other fixed cost
Insurer Win -- If policyholder cancel policy after 6 years?

Posted by unicornbird > 1 month ago | Report Abuse

Shouldn't insurer apply heavier penalty?
to ensure they win, even if policyholder cancel in first 2 years.

Posted by wsb_investor > 1 month ago | Report Abuse

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).

Posted by wsb_investor > 1 month ago | Report Abuse

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

Posted by wsb_investor > 1 month ago | Report Abuse

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).

Posted by unicornbird > 1 month ago | Report Abuse

Got it on BNM's rule & competition forces them to be gentle on penalty
Looks like Allianz is very heavy on ILP, it's 16x of AmMetlife

I like ILP as a shareholder, because it's free money, sure win game
Has Allianz got the largest share of ILP?

Posted by wsb_investor > 1 month ago | Report Abuse

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.

Posted by unicornbird > 1 month ago | Report Abuse

Allianz has a lot of growth potential, since Prudential is 7x larger

Strange that gov allows such important market to be almost fully taken by outsiders?
Etiqa & HLA are the only local brand, with about 20% market share
this will cause serious $ outflow, when these company repatriate earnings back to their home

Posted by wsb_investor > 1 month ago | Report Abuse

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.

Posted by unicornbird > 1 month ago | Report Abuse

Looks like insurance is a tax paid to developed country?
for ILP, the real benefit to local population is negligible, since most will not complete the contract.

I see Prudential has the largest share. Will BNM cut the share from UK, if EU increase investment in Malaysia?
Is there a way BNM can control insurer's market share? eg, limit the agents insurer can hire, etc

Posted by unicornbird > 1 month ago | Report Abuse

Good to see Berkshire coming in.
Prudential Sg also moved their actuary to KL. it will create a lot of high pay jobs

Posted by wsb_investor > 1 month ago | Report Abuse

all time high now

Posted by kk7198 > 1 month ago | Report Abuse

Yeah, an evergreen share.

Posted by wsb_investor > 1 month ago | Report Abuse

all time high again wah

Posted by wallstreetrookieNEW > 1 month ago | Report Abuse

All time high is RM16.28. It is close though

Posted by wallstreetrookieNEW > 1 month ago | Report Abuse

How is the combined ratio for this quarter?

Posted by observatory > 1 month ago | Report Abuse

All time high was RM16.9 based on closing price on 3 Jan 2020. However, on dividend adjusted basis, today closing at RM14.94 is also all time high. The company has paid over RM3 in dividend in less than 4 years.

Posted by unicornbird > 1 month ago | Report Abuse

wsb, apart from low liquidity for ICPS & no voting rights, what other con does ICPS has?

Posted by wsb_investor > 1 month ago | Report Abuse

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

Posted by observatory > 1 month ago | Report Abuse

Yeah, let's hope the volume can support too. EPF selling has either slowed down or stopped their selling.
If price continues to strengthen and the coming quarterly result is good, most likely analysts will revise TP upwards in order to keep their buy calls.

Posted by kk7198 > 1 month ago | Report Abuse

An evergreen share that needs no observation and monitoring.

Posted by unicornbird > 1 month ago | Report Abuse

insurance ability to grow depends on gov regulation, which is highly linked with geo politics. Good thing is Allianz is German based, strongest country in EU. hence more bargaining power
If EU continue to weaken due to Ukraine conflicts, it may weaken EU's bargaining power in the region. Hence evergreen or not, depends whether EU can stay evergreen

Posted by observatory > 1 month ago | Report Abuse

A good sharing from YAPSS.
https://www.youtube.com/watch?v=HAv8IrcfPnA

Charlie Munger advised people who could afford the claim to self-insure rather than buying insurance policies.

But with one exception, which is medical insurance, where insurance companies have negotiated better deals with health care providers. While this is true in US, does it apply to Malaysia? I've heard private doctors recommending unnecessary procedures just because patients are covered by insurance.

Posted by wsb_investor > 1 month ago | Report Abuse

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.

Posted by Snake > 1 month ago | Report Abuse

RM18

Posted by wsb_investor > 1 month ago | Report Abuse

who goreng this stock?

Posted by wsb_investor > 1 month ago | Report Abuse

Really day day up, weird

Posted by observatory > 1 month ago | Report Abuse

Share price has reached/ soon to reach analyst TP - RM15.2 (Kenanga, buy), RM16.7 (Am, hold), RM16.7 (RHB, buy), RM16.75 (Maybank, buy).
If the coming result is good, analysts are likely to revise TP upward to keep their buy calls, which is minimum 10% above prevailing price.

Posted by wsb_investor > 1 month ago | Report Abuse

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.

Posted by wsb_investor > 1 month ago | Report Abuse

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.

Posted by wsb_investor > 1 month ago | Report Abuse

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

Posted by wsb_investor > 1 month ago | Report Abuse

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

Posted by moven00 > 1 month ago | Report Abuse

Rest awhile. Hopeful it will have legs for round 2 rally. Someday Mr Market will finally realized its deep undervalue hopeful.

Posted by wsb_investor > 4 weeks ago | Report Abuse

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

Posted by observatory > 4 weeks ago | Report Abuse

I believe most analysts are not concerned about IFRS4 versus 17 profits. They have been guided by management that total life time profits remain unchanged.
Besides, most of their valuation method consists of P/B multiple of general insurance + EV multiple of life insurance. So their valuations are not driven by a single year profit.

Posted by Papayashot > 4 weeks ago | Report Abuse

It seems that STMB's profit is unaffected by IFRS17.. Surprising indeed.. I think somebody (forgot who) in this forum mentioned before that their profit will be released much much slower under IFRS17?

Posted by wsb_investor > 4 weeks ago | Report Abuse

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

Posted by observatory > 4 weeks ago | Report Abuse

@wsb_investor, you mentioned STMB has higher CSM release rate (annualized 19% versus Allianz 12%), which supports its higher PBT.
Putting management choice aside, could it be STMB’s life policies have shorter average duration than Allianz’s?
Assume a constant scenario. If CSM is evenly released, it will be completely released in RM1,117m/ (RM109m*2) = 5.1 years.
By contrast, could Allianz’ policies have a longer average duration = 1/12% = 8.3 years?

If STMB keep growing its business, it can also replenish the CSM despite fast release. After all the Family Takaful industry has a higher growth rate than conventional life.

Note 24 also shows that amount of CSM recognized is growing. The half year release was RM116m versus RM109m a year ago (7% growth)

Compare first half 2023 to first half 2022:
Family Takaful revenue grows at 22% (RM601m vs RM492m)
General Takaful revenue grows at 25% (RM600m vs RM479m)
Group PBT grows at 24% (RM261m vs RM211m)

Posted by wsb_investor > 3 weeks ago | Report Abuse

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.

Posted by observatory > 3 weeks ago | Report Abuse

Yes, I also notice STMB has tweaked its Q1 number. It means its IFRS17 transition work is active into Q2. Is this common among other insurers/ takaful players? Is this an indication about competence?

You’re right that purely looking at insurance service, 1H22 insurance service results have dropped 25% after IFRS17 (RM137m vs RM184m)
I also noticed that, measured in IFRS17, insurance service has experienced decline. RM96m in 1H23 vs RM137m in 1H22. The result is only saved by investment return.

Looking at Note 28, most of the “other investment RM8,871m” consist of fixed assets. The corresponding 1H23 income of RM231m implies about 5% yield, which is reasonable. These incomes should be shared with policyholders’ funds.

Is the sharing represented by “Net profit expenses from takaful contracts issued”, which is RM102m?

In other words, shareholders got slightly more than half of the investment gain. Do you think this ratio is too high?

Posted by wsb_investor > 3 weeks ago | Report Abuse

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.

Posted by observatory > 3 weeks ago | Report Abuse

"Classified" as shareholder fund, but not economically? Does it mean the fund is presented as shareholders owned, yet the benefits are not for shareholders?
If that is the case, the profit shown will be very misleading. Worse than IFRS4 time.

By the way what is GMM?

Posted by wsb_investor > 3 weeks ago | Report Abuse

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.

Posted by observatory > 3 weeks ago | Report Abuse

I look up Allianz's notes. It explains that VFA (Variable Fee Approach) is a mandatory modification of the General Measurement Model regarding treatment of CSM, in order to accommodate direct participating contracts.

As I understand, Takaful concept is risk sharing. So by default should be participating, right? So should adopt VFA.

Are you saying that STMB's higher investment return (even after netting off profit expenses) may not fully belong to shareholders?
If that is the case, the financial statement will be quite misleading. The excess reported profit will have to be deducted in the future, but how?

Posted by wsb_investor > 3 weeks ago | Report Abuse

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.

Posted by observatory > 3 weeks ago | Report Abuse

Under IFRS17, compare 1H23 to 1H22, there is still a substantial increase in net investment income (RM252m vs RM126m)

Setting aside fluctuating FV changes, impairment and so on, the main increase has come from investment income on financial assets not measured through profit or loss (RM231m vs RM184m. I wonder if it benefits from interest rate rise)

Most of STMB's investment is in relatively low risk fixed income instruments. As long as the interest rate and economic condition remain stable for next few quarters, the investment income will probably be above RM100m per quarter. This could offset the decline in insurance service results (which might also be temporary?)

Posted by wsb_investor > 2 weeks ago | Report Abuse

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