sheldon

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

observatory

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

sheldon

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

wsb_investor

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

sheldon

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

wsb_investor

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

sheldon

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

observatory

"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

wsb_investor

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

2022-01-19 09:19

wsb_investor

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

2022-01-19 11:22

Papayashot

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

wsb_investor

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

observatory

@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

wsb_investor

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

observatory

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

observatory

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

observatory

4QFY21 results can be found here

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

2022-02-22 20:01

observatory

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...

2022-02-22 20:09

observatory

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.

2022-02-22 20:25

Papayashot

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?

2022-02-22 22:45

observatory

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.

2022-02-22 23:03

wsb_investor

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.

2022-02-23 09:13

wsb_investor

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.

2022-02-23 09:24

Papayashot

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

2022-02-23 09:50

wsb_investor

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.

2022-02-23 10:04

observatory

@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...

2022-02-23 16:35

wsb_investor

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.

2022-02-23 17:58

Papayashot

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

2022-02-23 18:30

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.

2022-02-23 18:50

Papayashot

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?

2022-02-23 23:27

masterus

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

2022-03-06 07:13

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"
=============================

School boy analysis.

2022-03-08 16:32

sheldon

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

2022-03-17 10:40

unicornbird

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

2022-03-25 10:24

Kitty Kitty

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

2 months ago

observatory

India's LIC IPO is priced at 1.1 times EV, significantly less than the 4 times EV mentioned by media earlier.

https://www.reuters.com/business/insurance-giant-lics-27-bln-ipo-india...

1 month ago

DickyMe

Post removed.Why?

1 month ago

Kitty Kitty

EPF has been buying non stop since the first MCO back in March 2020. I wonder how much has EPF raised their stake now and what's the agenda behind.

1 month ago

observatory

According to 1Q22 presentation,
Group Operating Revenue +6.3%
Group Gross Written Premium +9.5%
Group core profit before tax RM184.8m (versus RM130.7m in 3M21)

Both GI and life have recorded increases.

While the numbers look good, there are areas of concern in Life business.
New business value was RM59.1 million, decreased by 28.5%
This was mainly due to lower sales from agency, where agency ANP has decreased by 26.9%.

While current year profit has increased, it's the growth in NBV that will deliver the growth of future profits for life.

Is the decline in agency sales a temporary setback?

What is your view on the results?

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

1 month ago

unicornbird

obs, do you have friends in insurance industry to check on? sometimes competitor launch promo, which will eat up Allianz new sales.

1 month ago

observatory

It's an industry wide decline. In fact, according to the presentation, "Market share 3M 2022 increased to 9.3% (3M 2021: 8.8%)."

I'm not sure why the industry is not doing well despite face to face meetings are returning to normal.

1 month ago

wsb_investor

Q1 always a slow period for insurance sales, with exception of Q1 2021 due to 2020 lockdown.

1 month ago

observatory

@wsb_investor, thanks for the explanation.

By the way did you read last week weekend edition of The Edge? There was an article about Great Eastern. According to Bloomberg data it quoted, currently market prices this leading life insurer at only 0.53 times price to EV. Price to book is slightly below 1x.

Do other life insurers in this region also suffer from low valuation? What might be the reason?

1 month ago

unicornbird

wsb, could you please share why Q1 is low sales? is it because agents are on holiday mood, so cannot perform after Xmas holiday

1 month ago

wsb_investor

Q4 always come with great promotion for all insurers to hit their kpi + Q1 is also Cny period.

1 month ago

unicornbird

thanks wsb for sharing the good info

1 month ago

meowmiao

why Allianz good results but price stays? wondering why... and good dividend too

1 month ago

PunTatBerSiul

Post removed.Why?

3 weeks ago