observatoryThanks for explaining. It's not easy to estimate future growth based on quarter to quarter CSM number. Is NBV still the best indicator of growth?
wsb_investorI foresee there will be another small bump in share price when YE23 result is out. Then throughout entire 2024 will be rather stable.
Future spike will depend on medical business management (how often Allianz will do the repricing), medical inflation, MOH policies, and new business market share.
10/01/2024 10:56 AM
observatory@wsb, how big is the medical business contribution in terms of premium and profit? How might MOH policies affect it?
10/01/2024 12:09 PM
wsb_investorNo idea with Allianz, but can easily guess from Prudential and GE. Prudential with 73% claims from medical and GE with 55% claims from medical.
Total claims paid by Allianz Life = ~1.7bil in 2022, medical claims estimated to be ~0.9bil-1.2bil. Margin usually in the range of 20%, i.e. 0.3bil (cost of insurance for medical - claims paid), depending on the repricing cycle, will be more profitable when it is just "freshly" reprice, will be least profitable when the last reprice is long time ago. vs IFRS17 full year profit of 0.4bil.
If BNM delay repricing approval for one year, assuming 10% inflation, it will wipe out ~120mil profit for Allianz.
Nobody will happy with medical inflation, people will eventually drop coverage when it is not supportable. The key issue is because customers like cashless admission, not knowing the consequences of it. Singapore has already mandatory all medical insurance to have coinsurance/deductible. Suspect Malaysia will soon follow, if BNM/MOH is smart. However, changing to coinsurance/deductible, while will make medical business more sustainable, it will have immediate short term effect where the COI collected will reduce, and impact the short term profit.
Another key change is the rumor that government will end the RM1 treatment for government hospital, and will launch something like Singapore medishield/social insurance/社保. This will change the landscape dramatically. e.g. can people with private medical insurance opt-out? (if can, then this social insurance will be a failure with substandard life) If cannot opt out, then majority will have 2 insurances (or 3 if included insurance from employer). People might drop out from the private medical insurance as well. Regardless, personally I dont think social insurance (in any form) in Malaysia will success, especially under leadership of Anwar.
10/01/2024 2:15 PM
wsb_investorCost 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.
10/01/2024 2:20 PM
observatoryThanks for the explanation. Your point that medical inflation is not projected by actuaries and not reflected in CSM is important one.
10/01/2024 4:11 PM
troy88this underrated stock should enter the RM20+ region eventually..
11/01/2024 9:51 AM
sheldonAny reason why the preference and ordinary share price is converging?
12/01/2024 5:04 PM
yieldermedical 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
13/01/2024 1:56 PM
wsb_investorbreak 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.
15/01/2024 4:04 PM
wsb_investorA 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.
15/01/2024 4:13 PM
wsb_investorThe 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.
15/01/2024 4:16 PM
sheldonMy 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.
15/01/2024 10:02 PM
wsb_investorNowhere 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.
15/01/2024 11:37 PM
sheldonwsb_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.
16/01/2024 9:20 AM
wsb_investor660k 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.
observatoryGood 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?
16/01/2024 6:26 PM
wsb_investoryou cant fake death or fake critical illness, but very easy to fake hospital admission.
16/01/2024 8:58 PM
observatoryWhat 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
17/01/2024 11:29 PM
yielderbased 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.
27/01/2024 8:08 PM
yielderIs 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?
27/01/2024 8:10 PM
observatoryAIG 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.
28/01/2024 1:07 AM
wsb_investorMalaysia 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.
28/01/2024 6:42 PM
yieldergovernment 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
28/01/2024 7:30 PM
LHT4216148sorry 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 ?
27/02/2024 6:30 PM
wsb_investorThere 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.
01/03/2024 9:57 AM
yielderIs Allianz the largest insurer, for medical & investment linked product?
03/03/2024 5:00 PM
wsb_investorNo, 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.
04/03/2024 9:09 AM
yielderWho are the top 3 for new business & also inforce?
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?
07/04/2024 1:22 PM
observatoryClause 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?
07/04/2024 1:29 PM
observatoryCentral 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.
wsb_investorThe 25% is only cost of insurance, over paid claims. Not including any expenses. Any previous IFRS4 / IFRS17 profit margin is not meaningful.
10/04/2024 12:53 PM
observatoryThat 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%.
10/04/2024 4:34 PM
wsb_investorNo, 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.
10/04/2024 9:20 PM
observatoryGiven 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?
11/04/2024 7:54 PM
troy88Allianz will move up to RM30 eventually to join the likes of F&N, Dlady, etc in the RM30+ category..
12/04/2024 9:35 AM
wsb_investorEssentially, for protection business, insurers will earn a x% of total claims payment. And for Malaysia, medical claims are a lot higher than life claims.
