observatory

Yes, the demand is weak across the industry. In the current year prospect section, it mentions that the higher inflation may impact claim costs while lower disposable income may impact consumers’ purchasing power and spending on longer-term commitments such as insurance products.

2022-08-24 19:52

observatory

You may refer to slide 7 on core PBT calculation. It strips off the FV and tax effects.

2022-08-24 19:54

Papayashot

Hi observatory, from slide 7 of Analyst briefing, the fair value loss is -68.6 mil..
But in the Q2-2022 Quarter Report, the 6Month fair value loss is - 594 mil??

Am I wrong somewhere?

2022-08-24 21:59

observatory

Sorry I have no idea too. Maybe others can help explain.

2022-08-24 23:35

wsb_investor

594 should be assets side impact only, whereas 69 is net position. Interest rate up will reduce bond MV and reduce liability concurrently.

2022-08-25 00:39

observatory

@wsb_investor, thanks for the explanation. It makes sense. Liability will reduce when the assumed discount rate is raised.
However is it common for insurance companies to change their discount rate assumption from quarter to quarter? This could open up opportunity for life insurers (probably not Allianz) to massage their profits in every quarter, despite such reported profit may not be reflective of long term company potential.

2022-08-25 11:57

wsb_investor

Most of the liability measure with latest interest rate assumption, except a particular block of business. Another issue is that, there are reserve that floored to 0, so in comparison, less sensitive to interest rate movement. e.g. bond value drop, but reserve still floor to zero.

All these will be gone under IFRS17.

2022-08-25 14:13

Papayashot

hi @wsb_investor, does that mean the reported profit will be less sensitive to the fair value gain/drop in the upcoming IFRS 17?

2022-08-25 14:41

sheldon

Fellow investors, don't you think that whilst rise in interest rates may be bad in terms of fair value, the new cash flows form coupons, dividends & premiums will be able to invest at higher yields?

So rise in interest rates is a boon to the insurance companies.

Comments welcome

2022-08-29 10:25

wsb_investor

exclude one off impact, higher interest rate always better for Insurer.

2022-08-29 11:34

Papayashot

wondering on how IFRS 17 will impact on the reporting on this investment fair value gain/loss in the income statement later on.... Any comments fellow investors?

2022-08-29 12:55

wsb_investor

Products measured under VFA will have minimal impact from investment fair value gain loss. Most of the products sold by Allianz will be under VFA.

2022-08-29 14:20

Papayashot

Quoted from RHB-OSK:
"under the new MFRS 17 standards effective 1 Jan 2023, underwriting profits are to be stretched out across the lifetime of the contract, whereas underwriting losses are charged to the income statement immediately."

Pretty surprising from their statement that the underwriting profit is stretched out throughout the contract period, whereas underwriting loss is charged into the income statement immediately...

RHB-OSK claimed that the reported profit in IFRS 17 might be lower..

Any comments on their statement above?

From their claim, it seems that the profit would emerge slower in IFRS17 as compared to the current accounting practice..

2022-08-29 14:20

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. "

2 months ago

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.

2 months ago

wsb_investor

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

2 months ago

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.

2 months ago

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)

2 months ago

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

2 months ago

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.

2 months ago

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?

2 months ago

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%.

2 months ago

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.

2 months ago

wsb_investor

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

2 months ago

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).

1 month ago

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?

1 month ago

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!!

1 month ago

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.

1 month ago

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.

1 month ago

wsb_investor

EPF disposed for the first time

3 weeks 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/

3 weeks ago

wsb_investor

Almost all time high now

3 weeks 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 weeks ago

wsb_investor

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

2 weeks 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 weeks 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 weeks 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 weeks ago

observatory

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

2 weeks 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 weeks ago

wsb_investor

close at all time high now, despite EPF stop buying

2 weeks ago

sheldon

I sold some pref but still have some bullets left.

1 day ago