ALLIANZ (1163): Quarterly Results for Last 10 Financial Years

"General insurance industry facing up to RM3 billion in flood-related claims, says PIAM"

https://www.theedgemarkets.com/article/general-insurance-industry-faci...

Let's do a back of the envelope calculation on Allianz General's exposure.

(1) PIAM estimated RM2 billion to RM3 billion exposure. Let's take the average RM2.5 billion.

(2) Allianz General has about 13% of market share. For simplicity, let's assume uniform exposure across different insurance types like motor, fire... Allianz General's exposure will be RM2.5 billion * 13% = RM325 million.

(3) During FY2020, gross premium of Allianz General is RM2,356 million. Premium ceded to reinsurers was RM363 million, or about 15% of gross premium.

(4) I'm not familiar with how reinsurance works. In the case of recent flood, does reinsurance pays out when a certain claim threshold is reached? Not knowing how it works, I will make the assumption that Allianz General and reinsurers will shoulder the claims on 50-50 basis. Allianz is expected to shoulder RM325 million *0.5 = RM163 million.

(5) The PBT for Allianz General in FY2020 was RM432 million. Assuming it remains the same, an extra 163 million payout represents 38% reduction in PBT.

Any thought?

2021-12-29 22:33

there can be multiple reinsurance arrangements. for flood, very likely the arrangement is reinsurer will absorb all losses above a certain threshold.

2021-12-30 11:51

Good input. Can we expect the company to make provision in next quarterly report? Based on the amount we can perhaps get a glimpse of Allianz General's risk tolerance, on how much they are willing to cede to reinsurers to protect downside (besides the info on 15% gross premium).

2021-12-31 10:54

definitely will have provision. can expect Allianz to have a much lower profit (maybe even losses) from GI for Q4. but who knows, Allianz only serves rich customers, and maybe only a few affected. Poor people typically under insured.

2021-12-31 21:00

Trade in Peace

长期多头，这里是support支撑位置，守住前低都可以继续持有喔，是很有机会的一档股票
https://www.youtube.com/watch?v=voWmOcBQyb4

2022-01-03 04:03

x3mg33

Any idea if there’s dividend this year? seems rather quiet.

2022-01-07 17:24

During the past 5 years dividends were announced in January.

https://www.bursamalaysia.com/market_information/announcements/company...

2022-01-08 09:47

x3mg33

thanks

2022-01-08 11:50

kywoo

I expected a dividend range of 56 sens to 60 sens. I was totally taken by surprise when 2 hours ago they announced 63 sens. I must say it is a very generous dividend considering a difficult insurance market in 2021.

2022-01-10 20:15

Insurance market is not difficult yet, Malaysia still in honeymoon phase (for life). This 63 sens dividend sort of indicated that Allianz is very well protected by reinsurance for its flood losses.

2022-01-10 20:58

Going through the prospectus for ICP, it appears to me that the ICP should be trading at a higher price relative to the ordinary shares.

Any reason for the anomaly?

2022-01-13 10:45

Based on valuation methods like dividend yield or dividend discount model, it should enjoy a premium.

However the trading volume is thin. Any fund will take a long time to acquire or dispose a meaningful position. And the market price will move against it during the acquisition/ disposal. From that perspective it should suffer a discount for being illiquid.

The net result is market price fluctuates between a small premium to a small discount, reflecting the relative strengths of these two forces.

But for individual investors who have strong conviction and plan to hold forever (ok some exaggeration here), holding preference share makes sense.

2022-01-13 20:43

Tq observatory. So it's the trading volume is the setback.

I made my maiden purchase of ICPs today & I'm exploring an arbitrage of sorts between ordinary & ICP

2022-01-13 22:23

the gap is never more than 1%, even if you sell after dividend, pocket the additional ~1% dividend, so much effort for so little return? not completely risk free either.

2022-01-13 23:22

wsb_investor - Dividend rate is 20% more.

My somewhat simpleton mind tells me that holding ICP in the long run, I'll have more cash in my bank than holding ordinary equivalent. In return I just have to make a small sacrifice on trading liquidity.

Is this logical?

2022-01-14 10:11

The current dividend yield is ~4.7%, so with ICP u getting ~0.9% more, assume price gap no change, and 0 fee, you can pocket this 0.9%. but in reality, no, just not worth any efforts.

2022-01-14 10:29

TQ wsb_investor - 0.9% more stirs my interest.

I sold some of my in-the-money ordinary & withdrew some of my pathetic-yielding FDs & piled them on ICPs. I can smell the dividends & only hope for an upward drift thereafter.

2022-01-14 17:10

"The floods that hit the country recently resulted in losses amounting to between RM5.3 billion and RM6.5 billion, said economic affairs minister Mustapa Mohamed.

He said losses to property amounted to between RM1.2 billion and RM1.4 billion, followed by damage to vehicles, estimated at RM1 billion to RM1.3 billion.

Mustapa said the manufacturing sector suffered losses of between RM800 million and RM1 billion, and the agriculture sector between RM40.9 million and RM 49.9 million.

Meanwhile, losses to public assets and infrastructure amounted to RM2 billion, and those suffered by business premises were estimated at RM500 million to RM600 million."

https://www.freemalaysiatoday.com/category/nation/2022/01/17/up-to-rm6...

Recall earlier PIAM estimated the industry's exposure at RM2b to RM3b. Recently an analyst put Allianz's gross and net exposure at RM300m and RM50m respectively. Not sure about the basis of the estimate, but judging from the minister's figures on vehicle damage alone and Allianz's market share, the gross exposure may be lower.

2022-01-18 10:21

Which analyst is that? Yup, Malaysia typically just underinsured.

2022-01-19 09:19

PIAM is deliberating a proposal to make it compulsory for motorists to have such insurance (flood) coverage.

2022-01-19 11:22

As flood is common nowadays, may I know how an insurer could still ensure they make profit if flood insurance is sold?

2022-01-19 12:11

GI will play the long term game, if accumulated floor insurance is a loss (after reinsurance), the future floor insurance premium will increase to recoup back previous losses. Looking at flood insurance alone, over say 20 years horizon, sure need to be profitable to ensure long term sustainability.

2022-01-19 14:27

Marigold123

strong portfolio to sustain business growth

2022-01-21 08:01

@wsb_investor, it's the estimate from TA Securities.

https://www.thestar.com.my/business/business-news/2022/01/14/ta-securi...

2022-01-24 17:06

gemfinder

Sold 13.06 today open. Add back 58 sen n 63sen dividen. Stil gain rm200. Consider lucky

2022-01-27 21:57

Media reports in India have projected LIC's (India's largest insurer) market valuation at around four times the embedded value. https://www.reuters.com/world/india/exclusive-india-lics-embedded-valu...

2022-02-06 20:26

Foreign investors love India. Sensex was below 3,000 in 1998 after Asian Financial Crisis. By 2008, just before the GFC, it breached 20k. Later from a low of 9k in 2009 it went over 60k late last year. Current PE ratio is 30 times.

While the Indian state owned insurer may be sold at 4 times Imbedded Value, the other state owned insurer China Life's price to EV is less than 0.3 time (EV per share HKD48.7, share price HKD13.9)

Chinese insurers' net worth may be doubtful. But are the Indian insurer so much better?

2022-02-06 22:57

Besides the concern about asset quality and exposure to property sector, Chinese life insurers have been undergoing a painful process of streamlining their agents. The industry has cut the number of agents from over 9 million to current 4 million.

During the boom time, insurers enjoyed new policies bought by new agents, and their families and close friends who support them. But the quality was poor. Now the cycle has gone into reverse.

The situation is probably not very different from Malaysia. In the past many bought insurance to "support" good friends or relatives.

I recall ALIM drastically cut its agency size a few years ago.

Is this a typical cycle for insurers, from unchecked growth and cut them down later?

2022-02-06 23:02

4QFY21 results can be found here

https://www.allianz.com.my/content/dam/onemarketing/azmb/wwwallianzcom...

2 months ago

Don't be taken aback by the 4Q basic EPS of only 15.3 sen.

The basic EPS is derived after deducting the once a year preference dividend (refer Note 12a). Basic EPS always appears low during 4Q.

https://www.bursamalaysia.com/market_information/announcements/company...

2 months ago

The flood related claims seem to have limited impact on the General Insurance business. GI profit before tax in 4Q21 is RM114.5m (4Q20 RM130.5m, 3Q21 RM115.1m)

Earlier an analyst put the flood gross and net exposure at RM300m and RM50m respectively. Perhaps the impact was much smaller than expected.

For life, ANP resumes its growth (slide 23). There is a heavy concentration of investment linked policies with protection riders (slide 24, 25), which is said to be more profitable. But I have no idea how profitable it is.

Slide 21 mentions "ANP increased by 32.9% ... out pacing industry growth of 13.1%. Market share 12M2021 increased to 9.0% (12M2020: 7.7%)"

12M 21 NBV is RM275.2m (12M 20 RM239m). It has been increasing at a rate of about RM60m to RM80m every quarter for the past 6 quarters.

2 months ago

It seems that NBV has been hovering around 60 mil for 3 quarters already. Q1 2021 NBV ~ 83 mil.. Wondering how to calculate NBV, is it an indicator on the profit margin of the policy sold?

2 months ago

I got this from Internet:

In life insurance, new business value is the present value of the future profits associated with new business written during the year.

It's calculated by the insurer. I have no idea how it's worked out. I just take their numbers.

2 months ago

In slide 21, ANP increased 32.9% but in slide 23, ANP increased 29.2%. NBV increased 15.1%, lower than ANP, implying lower margin, but in slide 21, Allianz still mentioned higher margin. ILP sales in Q4 2021 (and overall 2021) is definitely great sign. Profit from this portion will only slowly emerge in later years.

2 months ago

Up to Q3 2021, the NBV margin is 44%, but in Q4 2021 itself, NBV margin drops to 30.6%. Full year NBV margin is 40%. Seems like a big campaign in Q4, but is typically for all insurers.

2 months ago

Hi web_investor, may I know how to calculate NBV margin?

2 months ago

Just PV of EV profit, with a defined earned rate and discount rate (assumptions used can be diff with IFRS profit). In layman term, can just generalized to see as PV future profit.

2 months ago

@wsb_investor,

This is from Affin

"SOTP valuation of 1x P/BV on the General operations’ 2023E BV and assuming a 20% reduction in the EV of RM3bn of its Life business (with transition to MFRS 17)."

May I confirm that while MFRS 17 may shuffle annual profits to earlier/ later years, it should not have any impact on EV, which is the present value of all future profits?

Unless the underlying assumptions to calculate the EV has changed...

2 months ago

EV is EV, IFRS is IFRS, unrelated. Equity (under IFRS) will change, but will not be right to look at ROE anyways, due to new CSM component.

2 months ago

Hi wsb_investor, under ifrs17, will the reported equity will be higher for Allianz, due to the massive ILP products?

2 months ago

why need to care if equity is higher or not? equity higher = lower future profit, equity lower = higher future profit. only thing that certain is, IFRS profit (life) 100% will be much higher vs right now.

2 months ago

https://m.youtube.com/watch?v=j0rFTC2Swww

Hi wsb_investor, did you mean the key is to have more liability (less equity) so that more profit can be generated? Something to do with contract liability?

2 months ago

masterus

2 months ago

DickyMe3

"wsb_investor

why need to care if equity is higher or not? equity higher = lower future profit, equity lower = higher future profit. only thing that certain is, IFRS profit (life) 100% will be much higher vs right now.

1 week ago"
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School boy analysis.

2 months ago

Less equity means less mouths to feed. Imagine siblings dropping dead. The survivors will have a bigger slice of the inherited property pie haha

2 months ago

unicornbird

is Allianz the best insurer to buy for long term? i have bought LPI already. looking to add another one

1 month ago

Kitty Kitty

Insurance business generally are stable as their business always considered a form of necessity nowadays .. unlike the old days ..

2 weeks ago