wsb_investor

In general, profit will be slower, that is super general. Allianz Life has a very special concentration on ILP. This is from the AGM.

The Group do not provide forecast/estimates for financial results. It is observed that retained earnings would be higher under MRFS 17 as compared to the current MFRS 4 mainly contributed by faster profit emergence for investment-linked products, and deferral of acquisition cost.

2022-08-29 17:22

Papayashot

Hi wsb_investor, quoted from you "In general, profit will be slower, that is super general. "..

As in MFRS 4, profit for Allianz Life (mainly ILP) is already slow. How come in MFRS 17, profit will be even slower?

2022-08-29 18:02

wsb_investor

Sunlife IFRS17 investor education:
1. Traditional insurance business has higher impact driven by deferral of new business gains.
2. Higher expected profit recorded in early years for VUL products in Asia. (VUL here not exactly ILP, but ILP is much more profitable vs VUL)


https://www.sunlife.com/content/dam/sunlife/regional/global-marketing/documents/com/sun-life-may-31-ifrs-17-education-final.pdf

2022-08-31 14:59

observatory

A report from Am Investment Bank:
https://klse.i3investor.com/web/pricetarget/research/64791

The last point "Upon the adoption of FRS 17, the negative revaluation on the group’s life insurance’s investments which dampened the group’s net profit in FY21 and FY22 will no longer have any P&L impact from FY23F onwards. We understand that the marked-to-market changes in valuation of securities portfolio commencing from next year will flow through the comprehensive income."

Is that true?

2022-09-22 15:33

wsb_investor

That is a very general statement. Under IFRS17, there are 2 key measurement models (VFA/GMM). Assets hold can also further split into "assets backing liabilities" and surplus assets (excess assets above liabilities, mainly to support required capital). Only assets backing VFA liabilities will have 0 P&L impact on change in fair value. GMM business and surplus assets will still subject to the usual change in fair value impact.

2022-09-23 09:11

observatory

Thank you for the clarification.
Based on balance sheet as of Jun 30, the assets side has about RM20b investments, RM1b reinsurance asset. Insurance contract liabilities is RM18b.
Does it mean around 20 + 1 - 18 = RM3b of investments may still be subjected to FV impact post IFRS17?

2022-09-24 12:05

wsb_investor

52 weeks high now, despite a poor market sentiment, thanks to EPF.

2022-10-06 16:18

wsb_investor

April 2020: 5.32%
Nov 2020: 5.539%
Dec 2021: 6.46%
Sep 2022: 7.25%
~2% increase in holding, total value ~47mil (is relatively nothing if comparing with EPF size)

2022-10-06 16:26

sheldon

A dividend play as market expecting a high dividend announcement come Jan.

2022-10-09 03:30

wsb_investor

#AIAGroup (Hong Kong) Update on #IFRS17 Adoption
"...the adoption of these accounting standards does not affect the underlying economics of our business with no material changes expected to the Group’s VONB, embedded value, solvency, capital, cash generation and the established prudent, sustainable and progressive dividend policy.

Operating profit after tax (OPAT) and shareholders’ allocated equity will remain the Group’s key IFRS performance indicators following adoption of the new standards. Our preparation for adoption is on track and we intend to provide a further update on the 2022 full year position in our annual results and the Group’s full restated consolidated financial statements for 2022 in the second quarter of 2023, prior to announcing the 2023 interim results.

For clarity, the adoption of IFRS 17 will resolve a large part of the non-economic accounting mismatch that is created between assets and liabilities in the Group’s consolidated financial statements under IFRS 4. In particular, the adoption of IFRS 9 and 17 will eliminate US$1.4 billion of the US$1.552 billion negative non-economic fair value movements on interest rate derivative financial instruments included within the net profit reported in the 2022 interim results. The Group uses these derivative financial instruments for risk management purposes. "

2022-11-13 20:28

observatory

AIA shareholders' equity, EV and NBV are also resilient against swings in equity prices, interest rate and other volatility. It can be found it page 68-70 of its 2022 interim presentation.
https://www.aia.com/content/dam/group-wise/en/docs/investor-relations/2022/AIA%20Group%201H%202022%20Analyst%20Presentation%20Final.pdf

Its disclosure is top notch. I hope Allianz Malaysia will provide greater disclosure too so that investors have better insight and confidence.

AIA has recently reported growth across all segments in Q3. Specifically for Malaysia, "The strong momentum that returned to AIA Singapore and AIA Malaysia in the second quarter continued through the third quarter with both businesses again delivering double-digit VONB growth. In each market, both our Premier Agency and partnership distribution channels grew VONB, supported by our ongoing investments in TDA. In Singapore, an increase in active agent numbers and a more favourable product mix drove growth, while we delivered excellent results from our exclusive partnership with Public Bank Berhad in Malaysia."

Hope this momentum is also shared by Allianz Malaysia.

2022-11-13 21:37

wsb_investor

https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/investor-relations/en/conferences/ifrs/221122-ifrs9-17-allianz.pdf

2022-11-23 09:34

wsb_investor

Allianz (Global) IFRS17 presentation, similar level of operating profit vs current IFRS. But not very representative, Prudential & AIA (Asia focus, more on protection) IFRS17 presentation will be more representative vs Malaysia business.

2022-11-23 09:36

wsb_investor

AmInvest report: The group’s stronger focus in investment-linked (IL) products with protection riders will put its life insurance business to be less significantly impacted by FRS 17, which will be implemented on 1 Jan 2023.
(wrong statement, IL is positively impacted under IFRS17)

Upon the adoption of FRS 17, the negative revaluation on the group’s life insurance investments, which has dampened the group’s net profit in FY21 and FY22, will no longer have any P&L impact from FY23F
(correct, to some extent)

2022-11-24 09:38

observatory

Despite the economic recovery so far, ALIM has yet to resume its NBV growth.

According to page 3 and 21, for 9M22, "New business value was RM208.4 million, decreased by 1.9% due mainly to lower sales volume from agency business". For comparison, before the pandemic NBV grew at 30% in FY19 and 17% in FY18.

https://www.allianz.com.my/content/dam/onemarketing/azmb/wwwallianzcommy/pdf/investor-updates/2022/2022_Q3_AMB_Analyst_Briefing.pdf

2022-11-24 12:18

observatory

The general insurance business GWP has registered 12.3% growth for 9M22, versus 10.8% for industry and 20.6% for Takaful (page 19). Given AGIC's dominant position in motor insurance, it has likely benefited from the strong recovery in auto sales this year.

However, the general takaful segment is growing much faster. According to Maybank Q3 presentation (page 49), in the combined market, Maybank Etiqa's share has expanded further to 15.5% whereas AGIC merely maintains at 11.1%
https://www.maybank.com/iwov-resources/documents/pdf/quarterly-report/2022/Maybank-3Q-9M-FY2022-Analyst-Presentation.pdf

AGIC will probably return to slower growth mode in 2023 (after benefiting from the low base effect this year). Hopefully by then ALIM NBV growth could recover to its pre-pandemic pace.

2022-11-24 12:23

Papayashot

Hi wsb_investor, quote from you:

Upon the adoption of FRS 17, the negative revaluation on the group’s life insurance investments, which has dampened the group’s net profit in FY21 and FY22, will no longer have any P&L impact from FY23F
(correct, to some extent)

How would the fair value gain/loss being reflected in IFRS17?

2022-11-24 12:55

wsb_investor

NBV cannot compare with 2021 (sales in Q12021 very high because sales in 2020 very low). NBV 9M22 vs 9M19 +25.6%, annualized ~8%.

2022-11-24 17:48

observatory

It's true that the good results of 1Q21 was skewed by lockdowns in 2020. So a YoY comparison with 2022 may not be appropriate.
NBV for 9M22 is RM208.4m.
9M19 figure was not reported in the quarterly presentation then. I worked backward from 3Q20 presentation which mentions "New business value (for 9M20) was RM 165.9 million, declined by 11.8%."
It means NBV for 9M19 = RM165.9m / (1 - 0.118) = RM188.1m.
The increase over a 3-year period, from 9M19 to 9M22 = 208.4/188.1 - 1 = 10.8%. CAGR is 3.5%.
It's fair to say that ALIM business has recovered back to and above pre-pandemic level. But the growth rate has yet to return to the double digit growth of 2018-19.
Of course, the EV at RM3.6b is larger today than 3 years ago.

2022-11-25 08:12

wsb_investor

1 year ago FBMKLCI 1514, Allianz RM12, today KLCI 1478, Allianz RM13.74, with RM0.79 dividend.

2022-11-29 12:07

wsb_investor

Zurich Insurance Group AG has emerged as the frontrunner to buy a majority stake in the Malaysian insurance business of US insurer MetLife Inc and Kuala Lumpur-listed AMMB Holdings Bhd, according to people with knowledge of the matter.

A deal could value AmMetLife Insurance Bhd at about US$400 million and would need approval from the Malaysian central bank, said the people, who asked not to be identified as the process is private. Singaporean insurer Great Eastern Holdings Ltd also remains interested in buying the roughly 70% stake, the people said.


Allianz size (from financial statement) is ~3x-4x of AmMetLife, but reputation wise and future new business sales are much more promising vs AmMetLife. 1.7bil MYR * 3 is already higher than Allianz market cap (with GI).

2022-12-09 10:02

observatory

Despite declaring an interim dividend of 16 sen for the first time recently, the final dividend of 69 sen is still higher than 63 sen in FY21. Full year dividend 85 sen is 35% higher than last year. The dividend yield is 6.1% at today closing price! It's even higher for ICPS. However on the flip side, does it also mean less growth prospect since less capital is needed?

2022-12-21 22:15

sheldon

One can manufacture profits with creative accounting and dubious accounting standards. I've invested in some companies that have massive reserves accumulated over years of profitability. Shareholders however suffer with share price stunted and microscopic dividends.
Dividends is proof of real and not just paper profits.
Generous dividends is proof of real and large profits!
Kudos to the management of Allianz!!

2022-12-22 09:48

wsb_investor

Over the past 10 years, Allianz (life) is still on rapid growing phase, where capital required is much more intensive, vs its yearly profit. Obviously as of now, as the 4th largest life insurer, it will no longer have this issue. AFAIK, Pru and AIA will pay maximum amount of dividend that is allowed under RBC framework yearly.

*Dividend is not depending on IFRS17 profit, even though profit is expected to spike under IFRS17, dividend will still still be in similar range, 85sen + 10-20% growth yearly.
**IFRS17 implementation cost is expensive (easily >10mil/year, over ~200mil PBT), but it will go away in 2023.

2022-12-23 14:17

wsb_investor

Suspect Vincent Tan new target is also a life insurance company. That means, it will be third life insurance that change owner in recent 1 year.

2 months ago

wsb_investor

EPF disposed for the first time

2 months ago

wsb_investor

据传，成功集团（BJCORP,3395,主板工业产品服务组）有意向南非桑勒姆集团收购MCIS寿险（MCIS Life）的51%控制股权。
https://www.sinchew.com.my/20230107/%E6%88%90%E5%8A%9F%E9%9B%86%E5%9B%A2-3/

2 months ago

wsb_investor

Almost all time high now

2 months ago

sheldon

I've sold my entire stake.
I reasoned that it must be an irrational exuberance for fantastic dividends that has pushed its share price to such heights.

2 months ago

wsb_investor

Actually pan-Asia insurance stock all rise to xx-weeks high now, e.g. PRU (HKSE).

2 months ago

observatory

Is there an irrational exuberance? It depends on whether the current level of dividend is sustainable.
I'm not sure whether there is a metric that indicates the level of cash that can be prudently returned to shareholders, something like free cash flow. AIA publishes its Free Surplus and Underlying Free Surplus Generation (UFSG) figures. However Allianz's disclosure is rather limited.
Therefore I will rely on the payout ratio (though earning may not be representative of the true picture, , at least before IFRS17).
We already know that 2022 full year dividend is about 177*0.85 + 169*1.02 = RM323m.
During 2019-21 period, net profit was about RM500m per year. I forecast 2022 full year profit to be around RM450m. So the 2022 payout ratio will be in the range of 65% to 70%.
Such payout level means the company is unlikely to be fast growing in the future as it sets aside less capital to fund its growth. However 65% to 70% is not excessive either. Given the stability of the business, current dividend level should be sustainable.
At today closing price of RM14.64, TTM dividend yield is 0.85/14.64 = 5.8% (ICPS is even higher). As long as dividend is sustainable, current share price from dividend yield perspective is still attractive. Other valuation measures we discussed before like embedded value, P/B and M&A all lead to similar conclusion.
I continue to hold my shares. I focus more on the dividend and will not be too bother with the share price for now.

2 months ago

sheldon

I'm not done yet. Hoping to swoop in if and when there's a bigger than expected drop. Only issue is that investors have to wait a year to reap the gains. The lack of trading liquidity makes this a boring stock to trade.

2 months ago

wsb_investor

For me, I foresee a spike in earning & share price in HY23 (August 23), and then YE23 (Feb 24), then will enter a stabilize phase, unless any major change in market share.

Allianz Life MY should already have internal projection readily available, just whether if they will disclosure it. Don't be surprised by a 50-100%, or even 200% spike in earning on the Life side.

2 months ago

observatory

Spike in 2023 earnings due to IFRS17 adoption, or also driven by real business outperformance?

2 months ago

sheldon

I think a significant spike in earnings will come from the increased yields of debt instruments - fixed deposits, new purchases of bonds etc. As wsb indicated, it's positive for all insurance companies.

2 months ago

wsb_investor

close at all time high now, despite EPF stop buying

2 months ago

sheldon

I sold some pref but still have some bullets left.

1 month ago

wsb_investor

https://fintechnews.my/34207/insurtech-malaysia/fwd-to-snap-up-majority-stake-in-gibraltar-bsn-life-plans-for-rebrand/

1 month ago

wsb_investor

Aaron Fryer, Regional Chief Financial Officer, Allianz Asia Pacific, said: “In a year of uncertainty and amid a turbulent global economy, our core businesses have displayed resilience and performed in line with expectations, achieving a 17 percent increase in operating profits in Asia in FY2022.

“The Life & Health (L/H) business saw robust growth, with operating profit up 20 per cent to EUR 532 million, primarily due to profit increases in Taiwan, Malaysia, and China.

“The Property & Casualty (P/C) business in the region showed continuous growth, with operating profit up 8 per cent to EUR 141 million, while total revenues rose 17 per cent to EUR 1.7 billion, driven particularly by strong growth in China, Malaysia, Singapore, and Thailand (including the acquisition of Aetna Thailand).

1 month ago

observatory

Thanks for the sharing. It's encouraging.

1 month ago

Papayashot

Thanks wsb_investor. The year of IFRS17 has arrived finally.. Hopefully Life's reported profit will not tremendously affected by the bond yield again..

1 month ago

wsb_investor

https://www.allianz.com.my/content/dam/onemarketing/azmb/wwwallianzcommy/pdf/investor-updates/2022/2022_Q4_AMB_Analyst_Briefing.pdf

1 month ago

wsb_investor

YE2022, PBT +12.6%, PAT -1.2% due to Prosperity Tax. Life core profit for past 4 years = 273, 270, 267, 325; GI profit for past 4 years = 362, 432, 437, 462.

1 month ago

observatory

The life insurance is still not doing well in Malaysia. The management wrote that "While life insurance segment annualized new business declined by 3.8% for the year ended 31 December 2022, this has outperformed the industry’s decline of 8.8% ..."

Looking into the details, page 20 of QR shows that life insurance block persistency ratio has dropped to 81.2% (versus 88.8% in 4Q21). It's quite a drop, as block persistency ratio used to be in the high 80% or even 90%.
Does it mean more policyholders surrender their policies? I hope this is not the start of a trend.

On the general insurance side, page 20 of analyst presentation shows Takaful GWP growth is 21.1%, more than double the growth rate of conventional!

1 month ago

wsb_investor

https://pulsenews.co.kr/view.php?year=2023&no=160281

3 weeks ago

Papayashot

Thanks wsb_investor.

Quoted from the link:
"Generally, the impact of guaranteed products is more significant in the increase of the margin, which means property and casualty insurers may benefit more as they offer more guaranteed products than those of life insurers that usually sell savings-type products."

Is Allianz ILP regarded as a type of saving-type product?

3 weeks ago

masterus

https://www.centralbanking.com/central-banks/financial-stability/7954749/run-on-us-bank-sparks-fears-over-interest-rate-risk

2 weeks ago

wsb_investor

AIA FY2022 report:
Overall expected positive impact of IFRS 9 and IFRS 17 compared with IAS 39 and IFRS 4

Under IFRS 4, mark-to-market movements on derivative financial instruments are reflected in net profit but these are not fully offset by the corresponding change in the value of the liabilities. The adoption of IFRS 17 will eliminate this non-economic accounting mismatch that is created between assets and liabilities in the Group’s consolidated financial statements under IFRS 4. Non-operating movements on derivative financial instruments for participating business was negative US$2,003 million in 2022 as shown below. For clarity, this figure would have been zero under IFRS 17. Including this effect, net profit will be at least US$2 billion higher than net profit under IFRS 4.

1 week ago

observatory

@wsb_investor, thanks for the sharing. Does it mean we can look forward to higher IFRS17 profit too for Allianz Malaysia?

I looked up AIA results. AIA's VONB (Value of New Business) in Malaysia grew to USD308m in 2022 from USD283m in 2021, which is 9% YoY growth. The growth has come from higher VONB margin (as ANP actually declined to USD440m from USD491m)

In comparison, Allianz Malaysia NBV declined to RM677m from RM717m.

It looks like AIA Malaysia still outpaces Allianz in terms of growth.

1 week ago

observatory

AmInvestment Bank published an insurance sector report today. It maintains Neutral on the sector. Buy call for Allianz.

It sees “Allianz Malaysia (Allianz) to benefit the most from a reduced volatility of interest rate movements on earnings after adopting FRS 17 commencing 1 Jan 2023.
…
Allianz focusses strongly on investment-linked (IL) products for their life business … more than 90% of the group’s life insurance contracts will be measured under VFA (Variable Fee Approach)
…
The adoption of FRS 17 will see the movement in interest rates on the securities portfolio backing VFA contracts to have lesser volatility on their earnings under the P&L. This is due to interest rate impacts on securities portfolio under FRS 17 being now adjusted from contractual service margin (CSM), which will then be spread out over time through the contracted period of the IL policies. Prior to this under FRS 4, the full impact of fair value changes on securities or investments backing VFA contacts flows through the P&L of Allianz, hence impacting earnings.”


AmInvestment also says
“We stay NEUTRAL on the insurance sector premised on the following considerations:
i. Continued liberalisation which will exert pressure on the pricing for fire and motor products on general insurance and takaful operators (ITOs) moving forward. Also, gradual detarrification could impact the contract liabilities (reserving) of ITOs;
ii. Slower demand for general and life insurance products in line with the slowdown in global growth rate. Economic uncertainties and volatile markets are likely to lead consumers to defer purchasing longer term insurance plans in the near term. We have seen smaller ticket-sized life insurance policies sold by certain insurance companies of late. Our economists have forecast a lower GDP growth of 4.5% in 2023 compared to 8.7% in 2022;
iii. Uncertainties surrounding the day 1 impact of FRS 17 implemented on 1 Jan 2023. These include the changes to revenue recognition and the retrospective adjustments to ITOs’ retained earnings, and
iv. Potentially higher medical claims on life/family takaful businesses in 2023. Cost for medical expenses are expected to rise due to inflationary pressures. “

5 days ago