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%.
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.
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?
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.
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
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.
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
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.
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?
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.
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?
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).
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?
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.
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.
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.
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.
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.
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?
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.
@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.
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.
Many hoo-ha with co-payment medical insurance recently. Insurers are already moving away from cashless, yet some doctor association/consumer group jump out and said, cashless is better. Many people don't see the point that, the saving in premium, will higher than the deductible in just 2-3 years time. You might need to fork out RM500 or RM1000 for admission, but you save back premium (and hidden commission) in 2-3 years. There is no free lunch, for everyone, but dropping the cashless feature, will introduce a great saving immediately.
For many white collar office job, you (and maybe your family) already covered by your employer's group insurance. There is no real need for you to have a cashless medical insurance.
Allianz has announced a pre-conditional voluntary cash general offer to acquire at least 51% of the shares of Income Insurance, subject to regulatory approval. Allianz intends to offer $40.58 per share for a total transaction value of approximately $2.2 billion (approximately EUR 1.5 billion) for 51% of the shares in Income Insurance. The offer price represents a premium over Income's NAV of $29.55 per share of 37.3%.
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New IPO: The onshore and offshore support services provider for the O&G industry, Steel Hawk Bhd aims to list on the Ace Market!
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