Choivo Capital

(CHOIVO CAPITAL) The Art Of Valuing Insurance Companies and why Teh Hong Piow is a god (LPI)

Choivo Capital
Publish date: Sun, 28 Oct 2018, 01:46 AM

My most popular post on i3 is currently,

 “(CHOIVO CAPITAL) The valuation of financial institutions. And why Coldeye is wrong on MBSB”

In it, I stated that, In general, most companies fall into 3 categories when it comes to valuations. They are

1.     Any company other than those in the other 2 category.

2.     Banks and Non Deposit Taking Financial Institutions. 

3.     Insurance companies.

And created a rough guide on how to value financial institutions and what to look.

It was only recently I found the time to properly study how to value insurance companies, and do my own research on Malaysian Insurance Companies.

I originally planned to release this at the end of December, the same time as my previous financial institution article. 
But I figured, what the heck, market is bad, most retailers are in “No Eye See” mode, anyway. The only ones left in i3, tend to be more thoughtful, and these are the people I want to identify and interact with more.

For those interested in really studying the insurance indstry, I would suggest you start by reading every single letter by warren buffet from 1957 to 2018. It’s about 3,300 pages. When you’re done, you will wish it was 10,000 pages.

Berkshire is after all the biggest reinsurance company in the world, and GEICO is the second largest car insurance company in America. They are also the most profitable insurance companies in the world. You will learn a lot.

Let me warn you first, this will be long. Insurance companies like banks have many hidden complexities, and to think you can just roughly value it is a mistake. There is a reason why many funds refuse to buy shares of insurance companies.

My nickname is Jon Lohsoh, and I intend to live up to it!

So let’s start.


Overview on insurance industry

The insurance industry is a very unique kind of business. Like banks, it is a little similar, in that the business in one way or another, consist of creating money out of thin air.

In the case of an insurance business. It like this. The insurance company hands over a piece of paper to the customer. The customer signs the paper and gives them back the paper and a stack of money.

Needless to say, the nature of it, is therefore one of a highly competitive commodities business.

Now the money received, is in more ways than one, a loan. And the goal of an insurance business, is for the cost of the loan to not be higher than the average borrowing rate, or better yet, the risk free rate. The best of the best insurance companies, actually make money on the borrowed money. IE, people pay them money to borrow them money.

This borrowed money, in the insurance industry is called “Insurance Float”. For Malaysian companies, we can easily derive this by taking the net insurance liabilities. They are various categories in the balance sheet (both asset and liability) side that relates to the insurance float, and you basically need to get the net figure.         

And the profit or loss (usually loss) on this float, is seen in the “Combined Ratio”, which is essentially the profit or loss over the net premiums earned. A combined ratio of lower than 100, means the float is profitable, a combined ratio of more than 100 means the float is unprofitable.

Another tool people often use in valuing the insurance business, is identifying the “Cost of Float”. This is essentially the insurance loss or profit, over the insurance float. It is recognized as a %.

This float is then used to invest in financial assets, to earn a higher return than the cost of the borrowed money. This is how most insurance companies make their money. Historically, almost every insurance company loses money in their insurance business and make it in the investment business.

A tool we use to try and identify the investing acumen of the insurance company, is “Investment Return on Float” which is the investment income divided by the insurance float.

And we thus reach our second part. There are two parts to an insurance business.

  1. The insurance business
  2. The investment business.

Let’s dig into them.


Investment Companies – Insurance divisions.

There are various types of insurance businesses with various products. But by and large they mainly differ in these key areas.


  1. Duration of contract and Counterparty risk

Depending on the product, travel insurance or reinsurance. The contract could have effects that last from either a few hours, or for a few decades.

Usually insurance like travel tend to have very short periods, vehicles, health, fire, life etc is usually one year.

While reinsurance contracts can sometimes last for decades. And the main risk here is counterparty risk. The longer the period, the higher the probability that the other party would not be able to pay up.

This is why we have things like T+3 in stock markets etc, because if it is T+120, the likelihood of the person being unable to pay becomes much higher.

Therefore, for things like reinsurance insurance, or catastrophe insurance. The thing most people look for is absolute financial strength. And this is the edge that Berkshire Hathaway has. The top 5 largest insurance premiums in the world were written by Berkshire.

Back in the day, people never really focused so much on the financial strength of the company, and tended to go for the lower offer. And since this is a business where someone signs a piece of paper and hands you over USD100million. Competition is naturally very cutthroat. With more and more people willing to take higher and higher risk.

And often, when these contracts turn out to be bad, and the Company is bleeding money. They are then forced into two choices.

  1. Go bankrupt
  2. Write more insurance contracts at ANY price, just so that more money can come in to cover the shortfall. Needless to say, the new contracts are even worse, and it’s a matter of time before the bleeding is too much for new contracts to cover.

    The insurance industry also has boom and bust cycles. So when one person is bleeding, the others usually are to. And when everyone is doing the same thing. Writing at any price to cover the increasing bleeding.

    When things end. You get catastrophic results. Which is why the insurance industry is in more ways than one much more regulated now.


  1. The size of average premiums

For things like travel insurance etc, they tend to be very small.For things like reinsurance, they tend to be huge, with one or two, reaching premiums in the billions of dollars.

This result very different kind of risk for each company. Most is elaborated in the point above.


  1. Predictability of the risks

For most of the products, the risk involved is very well known due to the sheer amount of data.

Car, health insurance, life insurance etc etc. All of these come with commonly available and well known actuarial tables.

The only edge most insurance companies of this kind, is to have an inherent business structure that cannot be beaten, economies of scale, better cost control, network effect and strong management.

What is strong management?

Any listed company will be subject to expectations of consistent growth in top line and bottom line. However, as the insurance industry is very cyclical like the stock markets. There are times, you must be willing to write nothing if the premium is wrong.

To allow your revenue and profit to drop by 50% or even 80%, because people are not paying you the right price for the risk being taken.

Many insurance bosses, know this, but needless to say, very few listed bosses dare to do this, other than Warren Buffet.

How about the rest? Network effect, Economies of Scale etc?

I would strongly suggest you read this answer by Glenn Luk. It’s a brief study on GEICO, Warren Buffet’s car insurance company.

However, for the reinsurance business, special insurance and catastrophe insurance, large data samples are often not available.

What is probability of a hurricane hitting texas, and how has global warming affected your odds?

When selling catastrophe insurance, did you price in terrorist attacks? Or bio attacks? Berkshire lost USD2.1 bil in 9/11.

How much is Micheal Jordan's leg worth, and what kind of premium should we charge?

Very interesting question. And for these, you need extremely good management with a deep understanding of probabilities and risk. 



Investment Companies – Investment divisions.

What about the investment portion of the business?

For many insurance companies, your ability to invest this float is make or break. If managed extremely well, you can turn USD17 a share to USD300,000 a share.

Berkshire Hathaway would not be where it is today, if Warren Buffet did not go into insurance companies and buy/develop so many of them.

He values the float so highly, that if someone offered him USD60 billion in cash (an asset), for the insurance float of USD 60billion (a liability in the balance sheet), he would say no.

Most insurance companies need to keep most of their float is low volatility and very safe investments, such as bonds, treasuries, government debt, fixed deposit etc. Not much return really.

One of the key advantage an insurance company can have here, is to have a strong parent company, with AAA rating, which would allow them to loan money at low rates, and also invest more freely into things like stocks, entire business etc

Unless it is a reinsurance company, chances are, if you’re talking about a standard issue insurance company etc, this is like to be the division that has the highest risk, because your ability to know what the money is being invested in is very limited.

In 2008, a small subsidiary of AIG, called AIG Financial Products Corporation, basically sold insurance on Collateralized Debt Obligation (CDO) and Mortgage Backed Securities (MBO) at stupid prices, thinking they were really worth AAA. The profit from this was considered free money, and was not that significant for the group.

In addition, the company also bought a lot of these MBO’s and CDO’s because they were considered to be as safe as AAA bonds and recognized as such in the financial statements.

AIG lost USD 99.2 billion in 2008, and was essentially sold and nationalized by the government via an issuance of warrants amounting to 80% of the company.

Companies like Allianz, Manulife etc lost money as well during the crisis, but not as much.

This is really the main risk of investing in insurance companies these days.


Conditions unique to Malaysian insurers.

Unlike our American counterparts, our Bank Negara here, actually take steps to regulate the pricing instead of allowing a full on competition to the bottom and further. Ie, the Tariff Structure.

General insurance, car insurance etc is priced based on a table given by Bank Negara. This means in Malaysia, it’s mainly a question of who has the better business structure, economy of scale and cost control instead of who can offer stupider pricing.

This is also why Malaysians pay a little bit more on average for car insurance. At least when you have not fully gotten your NCD. Our system rewards those who are safe drivers very well.

Having said that, since July 2017, BNM have been deregulating the car insurance, general insurance and life/family insurance. So things are looking interesting.

Also, life and health insurance have very low penetration in Malaysia with less than 50% of the population having coverage. So it’s to an extent a growth industry.



If you’ve read this far waiting for a “Rule of thumb” to value insurance stocks. Unfortunately, I cannot give you any. There are too many factors. It’s a lot more qualitative than most.

You need to judge the “Combined Ratio”, “Insurance Float”, “Cost of Float” and “Investment Return on Investment Float” over a long period.

As well as various qualitative aspects, such as the business, the character of the management, its track record, the leverage and other things. All of which are far from easy.

And if you’re done with the above. The general rule of thumb, is somewhat similar to most companies.

ROE needs to be high enough to cover the cost of capital. And assuming it’s a fair decent one, below 1X book is probably cheap, and above 2x book is probably a bit expensive.

However good things are sometimes worth paying for, as I’ll show below.


Table for most insurance companies in Malaysia.

Here is a valuation table i made for most insurance companies in Malaysia approximately a month ago. It should prove useful as an initial starting point in valuing insurance companies.

Do note pretty much every bank in Malaysia have insurance operations, but other than Maybank, I could not extract meaningful data from their annual reports. In the case of BIMB, their insurance arm, Takaful is listed.

The biggest insurer in Malaysia by far is Maybank Etiqa.

Here is a link for your reference, and drive whatever conclusions you may.

Why no pictures you ask? I have no idea why i cant post pictures into i3 for some reason. refer to the link above.

You may be wondering why certain insurance companies like MAA or E&O etc are not in? Its simple, the extraction takes alot of time.

Some companies are obviously rubbish, some companies have insurance operations, but is already disposed and classified under discontinued operations or asset held for sale. and some i like alot, so im not showing it.

On MNRB, i think its probably rubbish. I don't see why any insurance company worth a damn, would ever need such an insane right issue, when dividend have not been paid for a couple years to begin with

My guess, they fucked up their loss reserves/contract liabilities estimation or something, and now need capital to cover up the hole. 

The right issue is to recapitalize the retakaful and reinsurance business. This business is largely global, with competitors coming from overseas. I doubt MNRB is in any shape to compete with Berkshire Hathaway.

As said previously, management is key in insurance business, and MNRB does not look like it has a good one to me. 

One may then say, but its so cheap at 20% of book! They are better companies selling for cheaper now. If your book is rubbish, it will naturally be cheap.

Expenses wise, its roughly in line with other insurers.

But a major red flag for me, is they deferred RM320m payment of credit facility to Ambank. What kind of reinsurer are you, if this kind of payment also need to defer.

In reinsurance, you name and ability to pay is gold. For people to know, that you will be alive when everyone else dead to pay is one of the most important factor for a reinsurance company.



Why LPI and Tan Sri Teh Hong Piow is a god

From the table above, you may have, noticed a very significant outlier in LPI. Which has on average made a profit of 15% on its insurance float, and 28% investment gain on insurance float for the last year.

The reason why LPI excelled so much on the insurance front, was mainly because prices were fixed. And Tan Sri Teh Hong Piow, running LPI like how he runs PBBANK. Only writes insurance that is profitable, ie, from people who are likely to not cause much problems only.

He is willing to give up market share for profitability.

In addition, from conversations with LPI customers, one of the reason they buy LPI, is due to tie ups with PBBANK in certain areas, fast claims when anything happens, and its Tan Sri Teh Hong Piow. As long as its profitable, he can be flexible and understanding.

And like all companies Teh Hong Piow, cost is controlled by nobody business. Most banks and insurance companies undergo billion ringgit IT upgrades, and office refurbishment, new buildings (Affin’s new building is going to cost 13% of its Market Cap).

While PBBANK and LPI still uses pen and paper for some areas, extremely old furniture etc.

How great it is to an early PBBANK and LPI shareholder.

Just in case you’re wondering why LPI investment income is so high. Unlike most insurance companies, roughly 80% of the float is in equities, instead of Malaysian bond/treasuries or unit trust.

And most of the equity held is Public Bank Shares.

“The secret to investment is to find places that is safe and wise to be highly concentrated.” – Charlie Munger.

Teh Hong Piow clearly understands that.

Is LPI cheap? Well. It’s around fair value. I’ll leave it at that. I won’t say why, as the fun part is finding out on your own.

Also, I’m tired. Haha


I hope this was as useful to you as writing this was for me. I definitely learnt something new when crystalizing my thoughts. A company I thought wasn’t that great turned out to be fantastic.

As always, do let me know you thoughts. Especially if you think I’m wrong, or you have very different perspectives from me.


Facebook: Choivo Capital

Related Stocks
Market Buzz
6 people like this. Showing 50 of 124 comments


Or too demanding on me?lol

2018-10-28 22:31


I hope yr good friends / investors dont come to i3 n see all these...

2018-10-28 22:32

Jon Choivo

Warren still made unbelievable amounts of money on % and actual basis though.

How skillful one must be, for a "mistake" to still be so profitable!

And how many people don't even have a chance to make this mistake!

At the trough of 2008, cash percentage of portfolio is at all time high. Everybody wants to hold cash, nobody wants to buy stock despite how cheap everything was.

I understand that i cannot predict where market is going to go. I may have some opinion, but i do not allow it to affect my investing in a material way.

All i know is. If it think as an investment, its cheap enough, i will buy. If the price drop i should buy more, after checking my research again and seeing if anything have changed.

Do i actually buy more? Well depends on a few factors
1) Do i have cash?

2) What investment is it? Good net asset plays (my limit is 3%), Extremely cheap stuff (2%), Wonderful companies (3-30%).

3) What other opportunities are in the market? For example, RCECAP was fantastic when everything was overpriced. Now, its still pretty good, but i didn't buy more, because it is 30% already, and many other things have fallen to a price where its as good as an investment.

An argument could even be said that i should sell and buy others, when
i think the other is a better investment. But this is a quirk of mine.

I used to be very agile, but i found that every action i took was more emotional than logical, especially when prices fell or went up afterwards. And i couldn't really tell if it was an emotional or logical decision until a long time after the decision was made. Which makes it even more suspect.

So i decided, i will be even more careful when buying, requiring high discounts to fair value. And after i buy, i cannot sell unless there is a material detrimental change in fundamentals, or prices have gone up to a level where i don't think its as attractive as an investment.

Maybe one day, when my thinking is clearer and more experienced, i'll start selling cheap investments for even cheaper investments. But not yet i think.

So yeah. For example, MNRB, if it was this price at the start of the year, yeah, i would buy some. But this price when everything is cheap, does not look as attractive, unless CharlesT agree to guarantee capital and 15% return, with us splitting 50/50 any profit above 15%.

Posted by KLCI Going Holland > Oct 28, 2018 10:18 PM | Report Abuse

Jon ah, I ask you lah, when you identified a stock to be undervalued, how much more it fall only you buy more ah?

Warren buffet also say in 2008 he bought in a bit too early liao before it bottom out, so how are you going to prevent yourself from making master Warren's mistake?

Say for example a counter way way below it's fair value liao... but still keep falling lah

2018-10-28 22:36


Anyway just for your info, even cpteh also managed to get more than 100 waterfish for his cohort 1 to 10 in the first 2 years..but since then till now he has zero participants since 2014 i think

U at least can write much longer essays than n dare to charge rm5000 per tips where cpteh only charge rm500 per head.

So u should be able to earn more money from the fee ( not fm the stock mkt)...also not bad lah

2018-10-28 22:40

Jon Choivo

Its in essence a loan, and that is their opportunity cost.

I'm alot better than them at investment, and have a much wider view of the opportunities at hand.

My opportunity cost is therefore much higher. If i want 8%, i can just buy SPB tmr. That is 10% d.

Or even certain REITS in SG, selling below book, yielding 7% in SGD. Which is very different than RM.

Or buy a watch and sell it 3 weeks later for 10% gain.

Or borrow some money at fund societies.

This is not an investment for you or me. This is a bet. And i have to bear the risk of you disappearing. Anything can happen. I trust you, but i'm not stupid.

Which reminds me, 15% interest to be paid upfront. Haha

I will sign an agreement to hold for a minimum of a year, unless instructed to sell by you. You can close the investment anytime you want.

So if it shoots up 50% and you want close then, i'm ok.

Posted by CharlesT > Oct 28, 2018 10:29 PM | Report Abuse

15% guarantee? U only guarantee yr good friends 4.5% return a year woh...r u too mean to yr friends?

2018-10-28 22:42

Jon Choivo

I can get a lawyer friend to draft up the agreement and get it stamped etc.

2018-10-28 22:43


Choivo, funds not tutup already ke? Why still accepting de now? I want join can ah? I just need to print money, kikiki

2018-10-28 22:46


Aiyo i saw yr terms n condition to yr investors so i offer a much better terms to you n then u ask for much more n talk abt all these..

Yr terms to yr investor: guaranted 5% n profit sharing 60:40
My terms to you:guaranted 8% n profit sharing 50:50

N u ask for 15% guarantee..

2018-10-28 22:48

Jon Choivo

I will show these comments to them.

Because it will be the fund's money (includes their investment) that is used for this arrangement.

If anything, this shows how thorough i am, along with the margin of safety i require for any trade or investment.

If i was my investor, i would be very heartened with this agreement.

You know what ill adjust it for you, above 15%. 30% profit me, 70% profit you.

If it goes up to 50% (which is your conservative estimate), ill make 25.5%, you'll make 24.5%. About an even split.

If it goes up higher than that, which in your mind it should, since 50% gain is a conservative estimate, you will make a lot more than me.

Contact me on fb if you are interested.

Posted by CharlesT > Oct 28, 2018 10:32 PM | Report Abuse

I hope yr good friends / investors dont come to i3 n see all these...

2018-10-28 22:51


CharlesT, mari liao, he sense you rich fella wakakaka

2018-10-28 22:51


Anyway i kepo a bit..u entered into any agreememt with yr good friends/ investors?

2018-10-28 22:51

Jon Choivo

Only the investment fund.

I did bet money with them for malaysia elections, trump, brexit, mayweather pacquiao etc. After losing 5 figures, they all stop betting with me d. And invest money instead ahahaha.

Posted by CharlesT > Oct 28, 2018 10:51 PM | Report Abuse

Anyway i kepo a bit..u entered into any agreememt with yr good friends/ investors?

2018-10-28 22:53


Yr logic is very cute...if above 15% 30% profit yrs n 70% profit mine
If 50% profit 25.5% yrs n 24.5% yrs??

2018-10-28 22:54


24.5% mine?

2018-10-28 22:54


50% is not my conservative estimate lah its my aim...u very naughty n sneaky

2018-10-28 22:55

Jon Choivo

Yeah. After 50% gain, you start to gain a lot more than me.

My base is 15%. 30% of 35% (50-15) is 10.5%. My capital is guaranteed.
Total is 25.5%

Your base is 0%. 70% of 35%(50-15) is 24.5%

Now if it rise 60%.

My base is 15%. 30% of 45% (50-15) is 13.5%. My capital is guaranteed. Total is :28.5%

Your base is 0%. 70% of 35%(50-15) is 31.5%

I'll be nice, transaction cost for buying and selling i eat. Hahaha

2018-10-28 22:58

Jon Choivo

Haha, you know where to find me. I hope MNRB goes well for you.

Lets go get coffee, i'll tell you my favorite insurance investment in malaysia, in exchange for advice and critique from old timer like you.

2018-10-28 23:02

Jon Choivo

Aiyo, then like that be my investor loh!

And make money when i make agreements like this! Hahahaha

Posted by CharlesT > Oct 28, 2018 11:03 PM | Report Abuse

Very sneaky biz man.

If compare to yr terms to yr investor leh? Seems quite a big difference woh

2018-10-28 23:03


Jon , frankly speaking i dont trust you loh...but still can go out for a drink lah..lets c

2018-10-28 23:04

Jon Choivo

Haha alright., can email here to plan logistics.

Or if you know OTB, ask him for my number. We can whatsapp and plan logistics there.

Posted by CharlesT > Oct 28, 2018 11:04 PM | Report Abuse

Jon , frankly speaking i dont trust you loh...but still can go out for a drink lah..lets c

2018-10-28 23:05


Becoming yr investor for 4.5% return pa meh....better invest in record for past 10 years is much higher than that woh

2018-10-28 23:06


Ok lah hope to hv a kopi time with u one day in future...but hv to meet cpteh first coz he invited me several times since years ago

2018-10-28 23:07



have u check with SC whether it is permissible for you to advertise here in i3 or not?

to me....u can be charged under the Securities Industry Act......

2018-10-28 23:09

Jon Choivo


See how your opportunity cost higher than my investors because you're willing to spend hours studying.

They not willing mah, they rather go focus on career, family, hobbies or other thing mah.

So its either FD, Index, or me loh. Hahaha

Posted by CharlesT > Oct 28, 2018 11:06 PM | Report Abuse

Becoming yr investor for 4.5% return pa meh....better invest in record for past 10 years is much higher than that woh

2018-10-28 23:10


don't play play with Lim Guan Eng....this is now Malaysia baru.

2018-10-28 23:10

Jon Choivo

Yeah license is needed for fund management activities.

Currently, its not really a fund despite me saying so.

For large investors, i just run their account for them. And i don't charge fees. All gain all loss they keep. They just promise to keep all the money in for 3 years, and reinvest all the div.

People who give me money directly to put into fund, is more like loan or IOU, with kickers.

Just to be clear with people here. Not advertising a fund. I repeat, NOT ADVERTISING A FUND. Even if you want give money directly, ill only accept small sums.

Because my goal is to build a 5 year track record with third party certification, before i start a fund.

If cannot build good track record, aiyah, invest my own money can d.

Posted by qqq3 > Oct 28, 2018 11:09 PM | Report Abuse


have u check with SC whether it is permissible for you to advertise here in i3 or not?

to me....u can be charged under the Securities Industry Act......

2018-10-28 23:15


under the SIA, people cannot just go to forum and ask for investment money from the public......

-you need a licence
-you need a prospectus
-you need approval from bank negara and SC

u have to watch out for the definition of "public"

life not so simple one.

2018-10-28 23:19


Post removed.Why?

2018-10-28 23:24


go get yourself a CFA and work in the industry a few years.....

2018-10-28 23:38


of course...there is no law against a few friends and family members pooling resources together to manage a hedge fund......

2018-10-28 23:40


classical world of the world....Newtonian physics, deterministic, B Graham world, classical economics

modern view of the world......quantum nature, probabilistic, uncertainty principles....

2018-10-28 23:45


wakao qqq3 one hit see blood leh

2018-10-29 08:18


Dear hollandking,
Hope you like this view from atom to universe.
Human is able to rule the planet earth because we are the only species that able to us our limitless mind to imagine and hence able to inspired (thro’ story telling, writing and speech) to unite us in millions for better or for worse. The same imagination helps us in discovering many theory of Physic, chemistry and biology for the advancement of science. Our imagination helps us to create the rules of god and rules of law so that our conducts are complied with certain rule for mutual benefit and humanity. Our imagination helps us to create value in piece of paper thus create value and commerce. Our conscience helps to guide us to be ethical and finally the vastness of universal and our inescapable final destination death helps us to have humility.

Dear qqq3,
I am disappointed with you despite numerous explanations by KC you still remain clueless as of what value investor about and where you get the information, “last 12 months, the value investors lost until father mother cannot recognise.....”
Value investors are the hardworking people going thro’ the annual financial report, getting relevant information from internet and make some assumptions as of what the future earning look like then we classified the stocks as growth stock (reasonable PE with solid cash flow and increasing revenue) or value play stock (Low PE with solid assets) we then allocated a certain capital to each of the stocks. We are flexible in selling some of these stocks when we feel that the stocks already achieved our TP and we carried out periodic review and make some rebalancing on our holding when opportunity or our assumption had change to valid an adjustment.

I had never used any derogatory word to hit at any person before and you are the first and hopefully the last. Know why? Posted by hollandking > Oct 29, 2018 12:29 AM | Report Abuse
If you are intelligent enough, u will have a clue

Thank you

2018-10-29 09:20



whether high turnover, low turnover...stock market not for you.....

2018-10-29 09:38


osted by Sslee > Oct 29, 2018 09:20 AM | Report Abuse

stocks already achieved our TP

the biggest problem is the part dealing with with conviction....bull market makes a lot of money. Bear market lose a lot of money.

2018-10-29 10:39


Dear Jon Choivo ,

Do you think LPI can excel further since you're saying that the company still running on obsolete underwriting system, pen & paper,ect?
Ultimately, using technology brings advantages and cost benefits and failure to innovate will only bring disaster to itself.

What do you think?

2018-10-29 12:28

Jon Choivo

PBBANK and LPI is known to have one of the worst IT systems in banking and insurance.

But people dont lose money in banking or LPI because it system is bad. They lose money because they have no common sense. The give bad loans or write bad insurance.

The IT systems of LPI and PBBANK is good enough to get the job done. Some banks want to spend millions to automate one small part.

PBBANK etc just say, its ok, just continue.

PBBANK and LPI, or basically Teh Hong Piow, understands the importance of Return on Incremental Capital. They dont just simply do IT system upgrade because backside itchy.

Many banks willing to do IT upgrade like crazy, why? The money is not theirs. Their is no big boss with high skin the gamme.

Berkshire Hathaway is a USD500 billion conglomerate. Their HQ got less than 20 people. WArren buffet does not use excel, he does not have a bloomberg machine.

Ajit Jain turned Berkshire Reinsurance, from zero float in 1985 to USD49 plus billion today. He has less than 30 staff.

When it comes to banking and insurance. Its the people behind it that is aboslutely key, not so much the tools.

LPI can still excel further. As long as Teh Hong Piow is alive, and the culture is absolutely ingrained in the employees. With the future CEO being someone who has signifcant skin in game.

There is still plenty of places to grow. But the stock is really expensive on a quantitative basis.

Also berkshire hathaway is now 11PE. After earnings grew 67% in Q2.

newbie8080 Dear Jon Choivo ,

Do you think LPI can excel further since you're saying that the company still running on obsolete underwriting system, pen & paper,ect?
Ultimately, using technology brings advantages and cost benefits and failure to innovate will only bring disaster to itself.

What do you think?

2018-10-29 13:02


Dear Jon Choivo,

There's rumours within the PBB group that Tan Sri The may step down next year from all his current positions.

Any comments on the future of the group of companies?

2018-10-29 14:26


newbie8080 Dear Jon Choivo,

There's rumours within the PBB group that Tan Sri The may step down next year from all his current positions.

Any comments on the future of the group of companies?
29/10/2018 14:26<<<

Is this something new that no one in the market knows of?

If yes, this will affect the share price.

If no, and everyone has known of this (since it has been announced), the price has reflected this news in the market already.

2018-10-29 15:36

Jon Choivo

The market has known for some time he will leave. But i think on the official announcement there will a small drop.

I would not be worried about retirement, as i doubt tan sri is the type to just relax in retirement.

I'll start to worry upon his passing, about a year after. Having said that, i hope he lives a long long long long life. Even though i dont own any pbbank and lpi shares. Maybe i should buy some even if its abit expensive.

newbie8080 Dear Jon Choivo,

There's rumours within the PBB group that Tan Sri The may step down next year from all his current positions.

Any comments on the future of the group of companies?
29/10/2018 14:26

2018-10-29 18:28


Thanks for the insight

2018-10-29 20:15


Jon, you can't simply compare credit, life and general insurance business in the analysis. The nature of their business is completely different.

General insurance companies rely on insurance/underwriting income, life insurance companies rely mostly on investment income. It is unlikely to see a positive "cost of float" for life companies unless they sell only pure protection plans like reinsurers. All life companies in Malaysia are selling mostly investment related plans like investment linked and profit-sharing plans. Protection plans are relatively small in their portfolio. LPI and Tune are showing positive "cost of float" because they are general insurance companies and of course their claim ratios are good.

No doubt LPI is one of the best managed general insurance companies in town. They have a relative high fire(which is highly profitable) insurance from PBB and relatively small motor insurance (which is not that profitable). They have the best combined ratio in town. In fact, they are also the one under a lot of pressure under de-tariff environment as many will start cutting price to get into their fire insurance portfolio.

For composite insurers like Allianz, Etiqa, MNRB and Takaful, you need to breakup the account into life/general and analyse it separately to get a better picture.

2018-10-29 23:02

Jon Choivo

Dear Jarklp,

You are right. Life is way way way more competitive, and therefore the goal is to get it below average borrowing cost, and make the investment income.

Are you in the insurance industry? I would love to ask a few questions regarding some queries i still have.

Its only a rough guide after all.

2018-10-29 23:05


What do you like to find out? if i can answer...LOL

2018-10-29 23:29

Jon Choivo

Do you mind sending and email to or look for me on fb.

We can talk further there. Better yet, let me buy you coffee. :)

Or just drop your email here, and ill email you.

2018-10-29 23:35

Learner King

Still not stop trying to cheat water fish ah jon choivo? Hahaha

2018-10-30 17:15


Jon, do u go beyond annual reports to obtain the necessary quantitative data? Just curious haha

2018-10-30 19:29


Alex water fish reporting in~

2018-10-30 19:36

Jon Choivo

For individual company research, i do try if its something i really like.

But these days, everything is so cheap, and obviously good. A quick analysis will do.

Unlevered Jon, do u go beyond annual reports to obtain the necessary quantitative data? Just curious haha
30/10/2018 19:29

2018-10-30 22:49

enigmatic ¯\_(ツ)_/¯

@Choivo Capital, how do you rate LPI now, since the entire market has plunged and bargains are beginning to show?

2020-03-02 22:41

Post a Comment