wsb_investor

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.

2024-01-10 14:20

observatory

Thanks for the explanation. Your point that medical inflation is not projected by actuaries and not reflected in CSM is important one.

2024-01-10 16:11

troy88

this underrated stock should enter the RM20+ region eventually..

2024-01-11 09:51

sheldon

Any reason why the preference and ordinary share price is converging?

2024-01-12 17:04

yielder

medical insurance should be a loss leader for insurer? they might not make any money from medical insurance. but to use it as a lead generator, to sell high margin investment linked products

2024-01-13 13:56

wsb_investor

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.

2024-01-15 16:04

wsb_investor

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.

2024-01-15 16:13

wsb_investor

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.

2024-01-15 16:16

sheldon

My 2 sen take - The medical insurance industry is a rip-off. Not much actuarial science in it because the insured bears the risk if the insurance co has not enough funds to meet their promised cumulative coverage.

Mine is a case in point. I bought cumulative lifetime coverage of up to 660k for a monthly premium of 250. Several years later, they tell me that my 250 per month may not be sufficient to cover the 660k and advised that I increase it. My argument is that I'm not asking for an increased cumulative cover. It seems that my insurer has a right to the effect of withdrawing my coverage if I don't increase my premium. Wow! This is such a wonderful deal for insurers.

2024-01-15 22:02

wsb_investor

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.

2024-01-15 23:37

sheldon

wsb_investor - Tq for your response but I beg to disagree.

The 660k is not adjusted upward for inflation hence logically in all fairness my 250 premium should correspondingly remain. If I seek to increase my cumulative coverage, then by all means I welcome an increase in premium.

2024-01-16 09:20

wsb_investor

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.

2024-01-16 09:59

wsb_investor

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

2024-01-16 17:35

observatory

Good sharing. As a principle, a person should not be able to claim more than his actual expenses from his medical insurance policies. Any extra benefits should come from other types like critical illness policies. Isn't that how it should work?

2024-01-16 18:26

wsb_investor

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

2024-01-16 20:58

observatory

What is the implication for AGIC if it eventually win or lose its case against MyCC?
https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3415175

2024-01-17 23:29

yielder

based on chatgpt's analysis below, allianz is safe
The announcement is about Allianz Malaysia and its insurance subsidiary, AGIC. There was a legal issue with a competition commission (MyCC) accusing them of wrongdoing, but a higher court recently decided in favor of Allianz and other insurers. This means that the legal challenge against them was not successful, and they won the case. So, based on this legal matter, Allianz appears to be in a stable position.

2 months ago

yielder

Is there any policy Bank negara do to prevent Allianz from getting exposed to junk financial products, that caused AIG to collapse during to Lehman crisis?

2 months ago

observatory

AIG got into trouble because it recklessly sold “insurance” to other hedge funds betting against the housing market. Such situation does not exist in Malaysia.

Check the types of investments owned by Allianz Malaysia in Note 8 of Annual Report.

2 months ago

wsb_investor

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.

2 months ago

yielder

government cannot stop medical repricing. Allianz is owned by EU, which has overwhelming negotiation power. Malaysia has greatly benefited from huge EU investment into semi con and aerospace, etc. So repricing is a small price to pay

2 months ago

LHT4216148

sorry i just back to stock market , this stock last time suddenly goes so low now come back up .... can i go in ? Will it drop to RM14 or RM17 again ?

1 month ago

wsb_investor

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.

1 month ago

yielder

Is Allianz the largest insurer, for medical & investment linked product?

1 month ago

wsb_investor

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.

1 month ago

yielder

Who are the top 3 for new business & also inforce?

1 month ago

PureBULL ...

ALLIANZ

ytlp is still the # 1 stock on klse now.
n is followed closely by Utdplt.
n the next up n coming could be Allianz.
its just starting anew...

https://www.tradingview.com/x/M8hpTVvd/

1 month ago

troy88

Very steady. For serious investors..

2 weeks ago

observatory

@wsb_investor, good sharing on the medical and health insurance policy document.

Before this new policy, are insurers already allowed to market products with co-payment feature? However, as BNM now mandates 5% co-payment (clause 9.4) in new products, it will prevent unhealthy competitions as insurers can no longer entice customers with 100% claim products. By discouraging avoidable claims BNM hopes to lower future premiums.

Similarly, commission limits (Clause 11.1) may have the effect of preventing new insurers from gaining market shares through aggressive sales and marketing.

Therefore the regulations are beneficial to existing players as they discourage cutthroat competitions.

Is this the right understanding?

2 weeks ago

observatory

Clause 8.20(a) mentions “The loading shall not exceed 25% of the premium/takaful contribution or COI/tabarru’ rate prior to the claims”.

Does it mean if COI (cost of insurance) including expected claims, management fee, and commissions add up to RM100, the maximum chargeable premium is RM125? In other words, profit before tax margin is capped at 20%.

The effect is on one hand BNM discourage unhealthy competitions, but on the other hand it also prevents insurers from reaping excessive profit.

However, PBT margin capped at 20%, or net margin capped at 15% should be acceptable as historically ALIM PBT margin is in the range of 5% to 10% only?

2 weeks ago

observatory

Central medical claims data platform (Clause 12.2) – Does it benefit insurance IT service providers like Rexit?

Coincidentally, Rexit share price has a run-up right after the policy is published on 29-Feb.

2 weeks ago

troy88

Allianz is the insurance king of bursa!

2 weeks ago

sheldon

The run up of the price is perhaps a nice big dividend is in the offing?

2 weeks ago

moven00

Lagi Sekali ✅👏🏻….

2 weeks ago

wsb_investor

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

2 weeks ago

observatory

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%.

2 weeks ago

wsb_investor

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.

2 weeks ago

observatory

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?

1 week ago

troy88

Allianz will move up to RM30 eventually to join the likes of F&N, Dlady, etc in the RM30+ category..

1 week ago

wsb_investor

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.

1 week ago

yielder

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

3 days ago

wsb_investor

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.

3 days ago

yielder

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

1 day ago

wsb_investor

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.

1 day ago

troy88

Recent retracement was good time to buy. Long term TP 30+ still intact..

1 day ago

yielder

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?

16 hours ago

wsb_investor

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.

12 hours ago

yielder

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?

10 hours ago

wsb_investor

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).

9 hours ago

yielder

wsb if allianz were to redeem it's preference share. is it 1 pref share to 1 common share ratio? I found here, but not too sure. https://www.allianz.com.my/content/dam/onemarketing/azmb/wwwallianzcommy/pdf/investor-updates/2011/RightsofICPSHolder.pdf

1 hour ago