@freedomfund, thanks for your valuable inputs. I've learned a lot from you!
Considering the business fundamentals, management quality and valuations of the different insurers listed in different markets, which insurance stocks would you accumulate, besides the AIA stock you already own in HKEX?
Do you feel that insurance stocks are under/ over/ fairly valued as compared to the general market or financial sector stocks?
@observatory, don't mention it. I think you are much more experienced in investment.
Since you ask and also for the benefits of young investors :
Financial counters like banks and insurers/takaful operators are usually traded more efficiently ie close to their fair value as these companies are highly regulated and supervised by BNM hence more institutional and more informed individual investors in them. Some are traded at the higher end of the spectrum like Public Bank or LPI because of high quality management and assets. At the other end of the spectrum will be the likes of Affin etc.
Then which stock is good to invest for long term? (Short term trade will have a different strategy). Growth companies. How to identify them? Look at their KPI results like
Life/Family takaful : new business growth, persistencies, quality of distribution channels... General/Takaful am : new biz growth, claims ratio, distribution channels...
Current outlook in some listed Bursa insurers (my own opinion only):
ALLIANZ - good quality management, steady and sustainable top line growth. Once life revenue is more significant than general side, valuation will increase faster. At current price, it is fairly valued. This counter has a lot of long term holders, hence low liquidity. I attended their agency sales gathering before, thousands of agents there, the energy level is super charged. True enough, their top line numbers grew year after year. Fairly valued, but can accumulate long term hold.
MANULIFE - management expense is high, agency size stagnant, bancassurance with Alliance Bank costly and not much growth. For trading ok, I will not buy this counter for long term hold.
MNRB - management quality is a big question mark. Plenty of operational issues. Hence, share price is deeply undervalued by normal measurements such as BV or PE. The retakaful portfolio usually carries a lower PE valuation due to volatile earnings. If management overall KPIs are improved (such as life good persistencies), the share price will fly. If a new aggressive CEO is appointed to drive real changes, I will focus on this counter.
Takaful family market - yes, it is true that at around 14-15% penetration rate, it is still a virgin market. The last time I attended the MTA (Msian Takaful Assoc) annual dinner, the BNM governer talked about increase in penetration rate from 14% to 14.2% after one year (lebih kurang figures). Cannot be so small after all we have 11 family takaful operators. Then I realised the penetration rate formula is based on number of inforce certificates/total population. Note the word "inforce". Meaning, sell 1m certificates but if lapsed certificates are 700K, then the net inforce gain is only 300K. No wonder penetration rate grow so slowly and lapses affect profitability. Therefore to see if a takaful operator is doing well or not, quality of business needs to be known. Unfortunately, quality business in our Muslim market is still very far behind the conventional life insurance.
In short, For growing good quality insurers esp life - buy and hold long term. For poor quality insurers esp with more exposure to general - avoid or trade only.
Hi freedomfund, yes, it is rather annoying to see Top Management keep dumping the shares once they have LTIP shares in their hands.
My concern is: They start dumping their LTIP shares since 2015-2016, and during that time, STMB profit is way lower than the current level. So, are you saying that their Top Management is not so confident on the company performance since 2015, even STMB shows consistent profit growth year after year since 2015 till now?
@freedomfund, thank you for taking the time to share your thoughts. Your inputs have given me a fresh and useful perspective when I read those company reports. I've truly benefited!
KUALA LUMPUR (March 11): A majority of life insurance companies in the country are extending financial assistance to their policyholders who may develop side effects or complications resulting in hospitalisation from Covid-19 vaccinations. Life Insurance Association of Malaysia (LIAM) said the coverage includes hospitalisations costs that were medically necessary and reasonable due to side effects from COVID-19 vaccination under the National Covid-19 Immunisation Programme. A number of life insurance companies are also offering cash relief programme for side effects under their respective Covid-19 vaccine fund or medical assistance programme,” it said in a statement today. It said the assistance includes reimbursement of medical bills for Covid-19 patients and post Covid-19 vaccination support for hospitalisation due to vaccine side effects; medical assistance and special death benefits; hospitalisation income; and cash relief. Chief executive officer Mark O’Dell advised policyholders to contact their insurance company to find out more about the assistance offered in the event that they may develop side effects due to the Covid-19 vaccine. While applauding the government’s proactive efforts to protect the rakyat, he also urged Malaysians to play their part in the COVID-19 battle by registering for the immunisation programme via the MySejahtera application.
IFRS17 ... last time, if you close RM1billion in a quarter, you can report the revenue as RM1billion. After IFRS17, you have to pro rate it across the number of years of validity, i.e. RM1billion coverage for 20 years means RM12.5 million per quarter only.
Anyone can verify the above understanding?
If the above is truly the case, then you can see EPS per quarter is gonna be nosedive from the moon.
Yes you are right, revenue is not important anyways, it is more for the profit. It will not be a simple divide by 20 years also, the earlier years will have higher weightage.
Takaful has been making lotsa headlines these days. However, the glaring issue remains. IFRS17 ... last time, if you close RM1billion in a quarter, you can report the revenue as RM1billion. After IFRS17, you have to pro rate it across the number of years of validity, i.e. RM1billion coverage for 20 years means RM12.5 million per quarter only.
With the above understanding, it doesn't erode the Company's fundamentals. However, it does directly impact the earning per share per quarter.
It's like if you earn RM100k per year in your new job on a 10 year contract, you don't declare you're a millionaire immediately. Same goes for Takaful.
One thing I don't like is seeing the management key personnel keep on selling their shares. Well, although the amount is insignificant, but this is NOT a pleasant sign for investors. You can't always boast about your superb ROE, and meanwhile selling shares (almost everyday) to the market. For me, they are not sincere on what they're saying.
I also don't like seeing the various company's key principals keep selling their shares. This practice has been going on for several years despite company share price trending higher. It is as if insiders have less confidence than shareholders.
Note 15 (page 182) of 2020 Annual Reports provide details on the share-based payments arrangement. Current scheme was approved in 2013 EGM and would be effective for 10 years.
Year/ Granted shares/ Vested shares/ Outstanding by Year End 2020/ 1.8 million/ 3.6 million/ 5.0 million 2019/ 2.8 million/ 2.6 million/ 7.3 million 2018/ 3.1 million/ 1.0 million/ 7.7 million 2017/ 3.2 million/ 2.2 million/ 6.4 million
However, putting myself in management staffs' position, I probably will also dispose shares to buy cars/ buy house/ meet living expenses, or simply to diversify investment so that not eggs are kept in one basket.
Insider share disposal doesn't mean this company is not a good investment. It's just that key management staffs probably don't see their company share price growing like 3 or 5 times in the next 10 years.
I checked that their CFO seldom dispose her shares. But lately, she also cannot tahan & sell too. Last time CEO is the one who keep on dumping shares. But recently other key management peoples also keep dumping.
All in all, we may convince ourselves these guys wanna diversify their investments. But I am just wondering how come almost every key personnel did the share dumping lately? Everybody also wanna diversify? I agree it may not reflect the deteriorating fundamental of STMB, but for me as investors, I surely don't like to see this.
@Papayashot, you're very observant. I didn't notice the different behaviors between CEO and CFO.
Personally I believe in the short term STMB will suffer again just like during MCO1.0. Although motor claim will stay low, STMB has more reliance on credit products sold via bancassurance partners. I guess few people want to buy cars or homes during this period. Showrooms are shut and legal work probably crawl to a halt. The 2nd and 3rd quarter results may not look great. Of course this is a short term consideration.
Hi Observatory, I believe the motor insurance of STMB is doing great, just like other companies. For credit related products, again, it boils down to how severe is the impact of the IFRS17. Even in AGM, the CEO did not answer (he said subjected to the financial performance in 2022). Well, again, it is hard for outsiders like us to really know the impact. But I believe the CFO/CEO will surely know something...
kudos to Takaful CEO Mohamed Hassan Kamil. for outstanding performance under his management. share price rose from below 40 sen to almost RM 10 before share split. just track where else will he heading to lead. BTW I am just IT guys.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Sanofi
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Posted by Sanofi > 2021-03-10 01:16 | Report Abuse
now almost all the local banks are selling islamic loans and what do you think for the next 2/ 3 quarters...