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.
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.
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
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.
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.
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.
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.
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.
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
@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)
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.
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?
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.
"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.
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.
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?
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.
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?)
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.
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.
Another very good quarter. It's especially good to see that growth is picking up at Allianz Life. ANP grew at 18.5% outpacing the industry. Now market share has exceeded 10%. For the first time, the company has also provided agent recruitment info (slide 22). The CEO Program was also mentioned in the Annual Report.
Slide 3 shows 9M CSM grows at an impressive 11.5%, but NBV only grows at 3.1%. I wonder why is CSM growing much faster than NBV, given NBV is an important contributor to CSM. I worked out the quarterly increases. 3Q CSM increases by 3,156m - 2,993m = RM163m. 3Q NBV increases by 236m - 147m = RM89m. The difference is about RM74m. Does CSM increase faster mainly because no dividend has been paid in Q3 this year? (Allianz Group paid RM323m of dividends in FY22, contributed by both life and GI) Or most likely due to some assumption changes? I wonder, over the next few years, could Allianz life business grows at a high single digit. That could support a higher valuation.
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
Thanks for pointing out. I actually missed slide #7 while trying to find answer in the quarterly report! Note 1 explains RM69m increase in CSM due to "non-financial assumptions update". However, note 2 also mentions "higher CSM release due to non-financial assumption update", which is -RM321.4m Does it mean the assumption changes somehow cancel out one another?
In the same slide #7, "expected growth" contributes RM163.8m. What is "expected growth"? Does it refer to the expected return from investments, say 7% yield from equity portfolio? Or does it refer to the extra return expected from investments, example by revising assumed future return from 7% to 8%? If it's the former, the contribution will be recurring. But if it's the latter, the increase is only a one-time contribution that could be reversed in the future.
Yeah, rightfully life insurance valuation = Embedded Value + VNB * multiplier In practice, some life insurers are valued at below 1X EV. For Allianz Malaysia, both RHB and Maybank value it at 1X PE, but no premium is given, i.e. VNB multiplier is zero.
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.
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....