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.

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.

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

No, should be just 4th (by NB volume), 5th by IF volume (HLA 4th). Key difference between HLA and Allianz Life is the proportion of investment linked business (most profitable) over total business.

There is a new guideline on medical insurance by BNM yesterday. BNM push for coinsurance (lower premium, higher margin), and mandate that future reprice premium cannot higher than initial profit margin. BNM also push for a centralized data platform for medical claims.

Malaysia don't have rubbish financial products like the US, but we have rubbish politicians. The only remotely possible way Allianz will bankrupt in near future is government/BNM doesn't allow medical repricing. It took the industry quite a while to make general public and BNM understand that repricing is inevitable, but then I don't think Malaysia politicians will really honor what the previous government has agreed upon and can just u-turn anytime, doing anything for the sake of vote. Looking back past 10 years, insurance companies have been force to donate to mysalam, 70% ownership, delay repricing during covid, donation during covid etc, on top of a general prosperity tax in 2022.

you cant fake death or fake critical illness, but very easy to fake hospital admission.

https://money.udn.com/money/story/123742/7696251

660k is your annual limit. 99% of the claims, the amount will not exceed 100k, but the average claims amount will keep increasing. 660k annual limit, or unlimited limit medical card, the actual coverage policyholders entitle for in next 10 years, will have minimal difference.

Nowhere on earth that medical insurance rate is fixed, simply because you will not able to price in all future inflation, hence naturally it will only be short term basis, and will require frequent repricing. Medical insurance margin, in % is actually one of the lowest, and it is a lot harder to manage it vs say death claims.

The first real round of medical repricing started in ~2015/2016. Prior to that, yes, many life insurance operate at a loss on their medical business. Because of that, previously there is no fancy million dollar limit / unlimited coverage, sort of like limit the coverage in order to minimize losses.
After 2015/2016, BNM is more "open" to actuarially sounded medical repricing, and then we started to see fancy medical coverage.

A sense of how medical COI rates exponentially increasing as we age, age 50 COI = 153% of age 40 COI, age 60 COI = 180% of age 50 COI, age 70 COI = 233% of age 60 COI, and all these before medical inflation.
https://www.prudential.com.my/export/sites/prudential-pamb/.galleries/pdf/en/listing/PRUMillion-Med-COI.pdf

Current average age of policyholder for big4 should be ~age40.
Under IFRS4, future margin doesn't include in profit calculation, under IFRS17, a portion of future margin is included in profit calculation.

break 20 tomorrow?
maybe 22 when YE23 results out.

Medical business might be a loss if there is no reprice for a while, but usually will have 20-30% margin upon repricing (reflecting next 2-3 years inflation). e.g. first year after repricing 30% margin, second year 20% margin, third year 10% margin, then another round of repricing again. Margin on medical insurance is the key source of profit for big4 players.

Cost of insurance for medical, will increase over time, as policyholder ages, and due to medical inflation. Assuming nothing will change, the yearly absolute margin from medical business will grow at at least 2x of inflation rate.

Some might say, CSM (PV profit) should already capture all these and current reporting should already reflecting all these, but actually is no. Actuaries will not project medical inflation (~8% p.a.) until end of policy term, as it will give very extremely high number that very hard to explain.

No idea with Allianz, but can easily guess from Prudential and GE. Prudential with 73% claims from medical and GE with 55% claims from medical.

Total claims paid by Allianz Life = ~1.7bil in 2022, medical claims estimated to be ~0.9bil-1.2bil.
Margin usually in the range of 20%, i.e. 0.3bil (cost of insurance for medical - claims paid), depending on the repricing cycle, will be more profitable when it is just "freshly" reprice, will be least profitable when the last reprice is long time ago.
vs IFRS17 full year profit of 0.4bil.

If BNM delay repricing approval for one year, assuming 10% inflation, it will wipe out ~120mil profit for Allianz.

Nobody will happy with medical inflation, people will eventually drop coverage when it is not supportable. The key issue is because customers like cashless admission, not knowing the consequences of it. Singapore has already mandatory all medical insurance to have coinsurance/deductible. Suspect Malaysia will soon follow, if BNM/MOH is smart. However, changing to coinsurance/deductible, while will make medical business more sustainable, it will have immediate short term effect where the COI collected will reduce, and impact the short term profit.

Another key change is the rumor that government will end the RM1 treatment for government hospital, and will launch something like Singapore medishield/social insurance/社保.
This will change the landscape dramatically. e.g. can people with private medical insurance opt-out? (if can, then this social insurance will be a failure with substandard life)
If cannot opt out, then majority will have 2 insurances (or 3 if included insurance from employer).
People might drop out from the private medical insurance as well.
Regardless, personally I dont think social insurance (in any form) in Malaysia will success, especially under leadership of Anwar.

I foresee there will be another small bump in share price when YE23 result is out. Then throughout entire 2024 will be rather stable.

Future spike will depend on medical business management (how often Allianz will do the repricing), medical inflation, MOH policies, and new business market share.

dividend payment before CNY, huat ar

Allianz on viagra again

It will not fully cancel out another. Actually in fact, 69mil as impact of assumption change is very immaterial.
CSM release % from 6% (HY23) to 9.2% (Q3) also not a material change.

Expected growth in the CSM is coming from the discount rate (risk free).
Imagine you will earn 100 in Dec 2023.
Initially in Dec 2022, you will PV for one full year, say PV(m0)
Then in Jun 2023, you will PV for half year, say PV(m6) , and this number will bigger than PV(m0).
That is the expected growth.
This will present as a cost actually in P/L, and to be offset with actual investment return, for GMM.
For VFA, this will be slightly difference.

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AmIB directly use CSM to value Allianz Life.
A couple of issue:
1. 3.3bil CSM is gross RI, gross tax
2. net CSM is much lower at 2bil
3. future profit is actually CSM + RA. RA is estimated around 15% of CSM for Allianz.
4. VNB should be included

increase in CSM due to assumption change. Page7, note1, Increase in CSM is driven by the change in non-financial assumptions mainly due to revision for persistency and mortality assumption

9M2022 PBT (Life), IFRS4 = 142.4, IFRS17 = 307.8. Even look at other basis, e.g. market share, NBV, dividend growth, all currently positive.

Break 18 tomorrow? expecting Q3 result to announce today, but apparently still no.
Anyways, positive catalyst from IFRS17 will last until Feb 24 (when full year IFRS17 is available, and much clearer and concrete).

Next potential positive is the medical repricing, another round of mass medical repricing is coming, which will increase absolute profit.

all time high now

capital gain tax 10%, SST for insurance > 8%

Codeblue reported many health reform initiatives by Anwar, supposedly effective next year.

If success, a significant health cost will transfer to M40/T20, great demand for health insurance. Only 7.5% of health financing currently from insurance, 46% from gov, 34% from private out-of-pocket.

If fail, like the recent lack of manpower in government hospital, government will have to transfer patients to private hospital (New Madani Medical Scheme), good for KPJ/IHH. And if the chaos persists, heath insurance demand might also increase.

Honestly, personally opinion, any form of heath reform going to be a chaos, like in many other countries.

if based on forward looking PE (10x), the fair value is RM2

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

Vet through all the takaful companies H1 report, only STMB and another recorded a drop in equity upon transition. Looking at the number, STMB probably has the economic of scale vs many others Takaful (not conventional) , but its profit confirm will on downwards trend over the next 3 years.

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.

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.

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.

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.

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

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

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

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

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.

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.

Really day day up, weird

who goreng this stock?

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.

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

all time high again wah

all time high now

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.

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.

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).

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