AAIC Intrinsic Value

You guys didn't read my post properly.

Read page 120 of the annual report very carefully. Read the last point. It is a letter from an independent source not marketing gloss.


After that read the below.

- market cap is 2.9 B
- there is some equity already
- plus the above point which .......

No insurer publishes the 3rd point. They just say LAT is passed. Pathirage published it for a reason

Gaja wrote:

knockknobbler wrote:

The Alchemist wrote:

knockknobbler wrote:

The Alchemist wrote:

knockknobbler wrote:

Gaja wrote:[quote="knockknobbler"

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Friend for general transactions the price is decided by the demand & supply, but as a minority shareholder if u have a considerable block minority shareholders also can sell his or her stake at premium, if am not mistaken Mr. R.F.T. Perera sold his stake in Glass to EPF last April.

Yes, I agree.
As Alchemist proved, theoretically also, it is not contrary to the market mechanism.

Also do u thing the major shareholder will sell 38% stake, if the minority shareholders have more than 13%, unless the major shareholder wanted to get out from the company, i don't think he will do that
From the face of it, your argument seems logical. We expect, he will not dispose more than 36%, initially ( unless he can sell entire 87%).
But....,is it essential to hold 51%, to have management control?
I think it depends on the level of maturity of the market. What I heard is ... most of these high-tech start ups (in US ), even after they are listed, were entirely controlled/managed by the founder successfully for considerable periods, without owning 51%.

rainmaker wrote:You guys didn't read my post properly.

Read page 120 of the annual report very carefully. Read the last point. It is a letter from an independent source not marketing gloss.


After that read the below.

- market cap is 2.9 B
- there is some equity already
- plus the above point which .......

No insurer publishes the 3rd point. They just say LAT is passed. Pathirage published it for a reason

@ Rainmaker - I read page 120 as you said. then i re read your above point. I still dont understand what point your trying to make. Please explain clearly.

knockknobbler wrote:

Gaja wrote:

knockknobbler wrote:

The Alchemist wrote:

knockknobbler wrote:

The Alchemist wrote:

knockknobbler wrote:

Gaja wrote:[quote="knockknobbler"

[color=green]

[color=red]

Friend for general transactions the price is decided by the demand & supply, but as a minority shareholder if u have a considerable block minority shareholders also can sell his or her stake at premium, if am not mistaken Mr. R.F.T. Perera sold his stake in Glass to EPF last April.

Yes, I agree.
As Alchemist proved, theoretically also, it is not contrary to the market mechanism.

Also do u thing the major shareholder will sell 38% stake, if the minority shareholders have more than 13%, unless the major shareholder wanted to get out from the company, i don't think he will do that
From the face of it, your argument seems logical. We expect, he will not dispose more than 36%, initially ( unless he can sell entire 87%).
But....,is it essential to hold 51%, to have management control?
I think it depends on the level of maturity of the market. What I heard is ... most of these high-tech start ups (in US ), even after they are listed, were entirely controlled/managed by the founder successfully for considerable periods, without owning 51%.

Even in SL there are companies run without single or related parties hold more than 51%

Also if you have more than 25% as single investor, you can sometimes asked for the premium price, because some of the decisions needed 75% voting, i think NHL got a good deal on GHLL due to this advantage.

I'm not an insurance expert but I was told the following about JINS and others.

Where does the profit of a life insurer come from? A transfer to shareholder fund


Why transfer? Because you hold excess assets

Read the LAT report about assets held to protect policyholders. Did you read point 4 about the fair value of the liability?

rainmaker wrote: I'm not an insurance expert but I was told the following about JINS and others.

Where does the profit of a life insurer come from? A transfer to shareholder fund


Why transfer? Because you hold excess assets

Read the LAT report about assets held to protect policyholders. Did you read point 4 about the fair value of the liability?

@ Rainmaker - Life Insurance 101 - When Life Insurance is sold, the Premium Income is invested and Income accrues to settle future claims arising from Life Insurance Policies. Every year, this Life Fund Assets (Investments) and Liabilities (Future claims) are valued by an actuary based on various characteristics such as life expectancy and income to fund etc. After this is done, a Surplus or Deficit of Funds position is determined. The important thing to note here is even when their is a surplus (generally in this case and most cases), the surplus does not belong to the shareholders of the Insurance company but the Life Policyholders of the Insurance Company and they are compensated through Bonuses. A prudent amount (in this case approx Rs 150 million) of the surplus over Assets and actuarially determined liabilities accrues to the shareholders and is transferred to Income statement. This is how AAIC even made a profit in 2012. without a life fund transfer, they would have made a loss as their non-life division did.

Lasith,

Did you get more info than you needed so far ?

lasithfernando wrote:Hey guys, I'm pretty new to the forum. This is my first post actually.

Just a query I have:

I read that 38% of Asian Alliance Insurance was bought by two foreign investment firms for an agreed price of 128 Rupees a share. Doesn't that mean that the stock's intrinsic value should be around that figure if not higher? And if so shouldn't the market price eventually reflect that value?

Your opinions would be highly appreciated

Cheers

Alchemist I agree with you. But they are having a provision for liabilities of 2.9B. The fair value of liabilities is 897M.


That's a big difference. Surely some of it can be passed on to the shareholder. May that is the intrinsic value?

How come other companies distribute high amounts.... JINS CINS SLIC to the shareholders?

[quote="rainmaker"]Alchemist I agree with you. But they are having a provision for liabilities of 2.9B. The fair value of liabilities is 897M.

That's a big difference. Surely some of it can be passed on to the shareholder. May that is the intrinsic value? [/quote

from 2012 Annual Report -

page 120 note 4. Un-audited balance sheet assets of SLRs 3,396.6 million are sufficiently adequate as compared to the discounted cash flow reserves of SLRs 806.4 million and in contrast to un-audited balance sheet reserves of SLRs 2,904.3 Mill

page 150 note 11. Insurance Liabilities Life
The valuation of the long term Insurance business, as at 31.12.2012, was made by Mr. M. Poopalanathan, AIA of Actuarial & Management Consultants (Pvt) Ltd. for and on behalf of Asian Alliance Insurance PLC.
In accordance with the Consultant Actuary’s Report, the sum of provision, Rs. 2,904 Mn includes the liability inrespect of Policy holders’ bonus as well. In the opinion of the Consultant Actuary, the provision is adequate to cover the liabilities pertaining to long term Insurance.
In establishing the valuation, a reserve of Rs. 5.83 Mn has been created for the purpose of any future bonus and contingencies by the Actuary.
Actuary recommended to transfer Rs.155.8 Mn to Share holders.

page 38 - Life Operating Surplus
Over the past few years, the Life operating surplus has been
growing significantly due to high policy value, retention rates,
prudent management of insurance claims, surrenders, expenses and
the return on investment in the Life segment. During the period
under review, the Company recorded a Life operating surplus of
Rs.707 Mn, which is a growth of 13% compared to the previous year.

(Rs '000') 2008 2009 2010 2011 2012
Life Operating Surplus 475,577 551,427 622,567 623,656 707,218
Life Surplus to Shareholders 160,000 195,000 253,610 200,000 155,879

Why do you think that the Fair Value of Liabilities is Rs 897 Million ?
Did you think that their was approx Rs 2 Billion Surplus, this should be considered as intrinsic value although it does not belong to the shareholders of the company ? (only a part does).

@Alchemist The liability value will be changed by 2015 to be the one used for LAT. There is some new regulations coming in and the new stuff is the same as the IFRS LAT calculation. The current calculation that the local guy is doing is based on an old technique that provides very very conservative results.

If you know the insurance industry well you will know what I'm talking about. I believe that this may be a reason for the new interest in insurance.

slstock wrote:Lasith,

Did you get more info than you needed so far ?

lasithfernando wrote:Hey guys, I'm pretty new to the forum. This is my first post actually.

Just a query I have:

I read that 38% of Asian Alliance Insurance was bought by two foreign investment firms for an agreed price of 128 Rupees a share. Doesn't that mean that the stock's intrinsic value should be around that figure if not higher? And if so shouldn't the market price eventually reflect that value?

Your opinions would be highly appreciated

Cheers

Oh yeah :p

I noticed a slight upward movement today with AAIC and a slightly higher number of bids than the last couple of days.

I guess it all comes down to this analogy:

If someone's willing to pay 120 rupees for a coconut that's selling at 80 rupees, the market has to decide over time if the coconut is worth 80 or 120 according to its own demand and supply

You got it.

lasithfernando wrote:I noticed a slight upward movement today with AAIC and a slightly higher number of bids than the last couple of days.

I guess it all comes down to this analogy:

If someone's willing to pay 120 rupees for a coconut that's selling at 80 rupees, the market has to decide over time if the coconut is worth 80 or 120 according to its own demand and supply

http://www.cse.lk/cmt/upload_cse_announcements/4211363755220_.pdf

Some interest today