Monday, April 27, 2009

Manulife to grow agency force, looking for partners

MANULIFE Holdings Bhd is looking to grow its agency force and is in talks to expand its bancassurance distribution network as it looks to maximise on opportunities amidst the current economic climate, its group CEO Michael Chan Yui Lung said.
Speaking to reporters on April 24 after the company's AGM in Kuala Lumpur, Chan said Manulife was keen to grow its agency force, which currently numbers about 1,500 nationwide.
"The percentage of new business coming from the agency force is about 73% of (new sales)," he said. "Our target this year is to recruit between 600 and 800 new agents," he added. Chan said the current situation was ideal to increase Manulife's agency force.
"The current economic situation may make a lot of people fear that they will lose their jobs and our agency force can provide them with an opportunity to join," he said.
"This is a good (time) for us to recruit more agents and we've seen the number of new agents joining us increase by about 10% so far this year. There is plenty of opportunity to grow here in terms of life insurance operations, given the penetration (rate) of about 40% in the Malay market alone," he added.
Chan said Manulife was also keen on growing its bancassurance dist ribut ion chain. The company currently has bank partnerships with four banks, HSBC Bank Malaysia Bhd, Citibank Malaysia, Alliance Bank Malaysia Bhd and OCBC Bank (Malaysia) Bhd.
"This gives us a range of about 200 branches (nationwide)," he added.
Chan also said the company was in active talks with a few potential partners but declined to elaborate until negotiations have firmed up.
Asked to elaborate on agency recruitment, Manulife Financial executive vice president and South-East Asia operations general manager Philip Hampden-Smith said it was during these challenging times that the quality of agents being recruited also improved.
"We get a lot of people from banks and qualified professionals like accountants who come to us... not just in Malaysia but in Asia as well," he said.
"And insurance companies have a slightly longer term perspective on the markets or seem to in the way they do their business, so that makes us an attractive proposition in terms of the financial services sector. So we're expanding rather than contracting," he added.

(The Malaysian Reserve, April 27, 2009, p4)

Takaful Ikhlas to focus on consolidation: BT

Takaful Ikhlas Sdn Bhd will focus more on consolidation of its operations this year amid the economic slowdown. Its president and chief executive Syed Moheeb Syed Kamarulzaman said the current financial year ending March 31, 2010 will see the company striving for more efficiency in its operations, reports Business Times (April 24).
He said such a plan is apt as the takaful business has not been spared the economic crisis, especially the general and motor takaful business. However, unlike the conventional insurance sector, which some expect to see negative growth, the takaful industry could still achieve 10 to 20 per cent growth after years of experiencing 40 to 50 per cent growth, the report said.
In a recent interview, Syed Moheeb told the newspaper Takaful Ikhlas has achieved commendable growth from only RM7 million in gross collection in financial year 2003/2004 to RM590 million in 2008/2009.
"Our expectation for this year depends on the new government, really," he said, referring to the new leadership under Datuk Seri Najib Razak.
"That is why this year, our main focus is on consolidation by enhancing our internal capability. The theme for us is 'Achieving Operational Excellence'," he said.
Syed Moheeb added that about RM8 million will be spent on a better document management system where all documents will be digitalised, a new accounting system and a new point-on-sale system.
Takaful Ikhlas is one of the participants in the Minggu Amanah Saham 2009 (MSAM 2009) held in Johor Baru, its sixth participation in six years.
MSAM 2009, said Syed Moheeb, is a good platform for Takaful Ikhlas to not only sell its products but also help create greater awareness for the public to understand the takaful concept and its benefits.
About 240,000 people came to visit MSAM 2008, he said, adding that more visitors are expected this year. "We may not be able to do direct sales, but we collect referrals by inviting visitors to participate in simple quizzes. These referrals helped our growth," said Syed Moheeb.

Bigger foreign equity in insurance?

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz met with insurance and takaful officials last week to inform them of some of the upcoming liberalisation measures. She did not disclose details of the plan, but hinted that new licences, namely for takaful operation, may be on the cards, an industry source said, reports Business Times (April 24).
Prime Minister Datuk Seri Najib Razak will announce the much-anticipated liberalisation measures for the financial sector today.
"Bank Negara will relax ownership rules for foreign financial firms and may grant new licences to operate here.
"The overall move is to help move the local economy because Bank Negara believes that the services and financial sector have always been the prime mover of the economy," the unnamed source told the newspaper.
The newspaper report goes on:
Currently, existing foreign shareholders can increase their stake in a local insurance company up to a maximum of 49 per cent - the maximum allowable under Malaysia's foreign investment rules.
New foreign insurance companies can also enter the industry but they can only buy up to 30 per cent of a locally incorporated insurance company.
The source said the lifting of the foreign equity barrier applies to both conventional and takaful operations.
The move will enable existing foreign players, mainly in the conventional insurance segment to increase their stake as well. It will also see new financial institutions making an entry into the Malaysian Islamic insurance.
But there's a catch. The new player will have to help facilitate the Malaysian entity to expand overseas.
"They must come with that added value, only then will Bank Negara be supportive of their venture," the source added.
It was learnt that local insurance companies, namely smaller non-life companies, will be pressured to merge with larger foreign firms as the implementation of the risk-based capital adequacy (RBC) framework deadline draws closer.
"These smaller companies are in dire need of capital injection to survive," the source said.
Business Times recently reported that at least seven non-life companies were unable to meet the minimum capital required come January 1 2009.
The RBC framework requires each insurer to maintain a capital level that commensurate with its risk.
According to the General Insurance Association of Malaysia (PIAM), as at April 1 this year, there were 39 general insurance companies operating in Malaysia comprising 23 general insurers, 10 composite insurers and six general reinsurers.

Tuesday, April 14, 2009

MAA rubbishes receivership talk: BT

Financial services firm MAA Holdings Bhd has dismissed as rubbish talk that the group or its insurance arm Malaysian Assurance Alliance Bhd (MAA Assurance) has been placed under receivership over unpaid debts, reports Business Times (April 6, 2009).
"The group has more than sufficient assets to back all liabilities," MAA Holdings chief executive officer and group managing director Muhamad Umar Swift told Business Times in an e-mail response.
It had had reported that industry sources told the newspaper that the holding company was under receivership due to bad debts, thus requiring it to sell its insurance assets.
"Pure rubbish. MAA Holdings' only loan is its RM200 million bond, which has been serviced promptly to date with no problems envisaged," said its executive chairman Datuk Tunku Ya'acob Tunku Abdullah.
He was referring to MAA Holding's medium-term notes of RM200 million.
The report goes on:
According to Bursa Malaysia filings, the group's total borrowings stood at RM231.38 million as at December 31 2008, compared with RM241.16 million in December 31 2007.
Tunku Ya'acob added that the rumours were malicious in nature and probably instigated by unprofessional agents of competitors.
Meanwhile, Muhamad Umar said that MAA Holdings was not selling its life insurance division.
The group, however, is selling its general insurance unit and a 4.9 per cent stake in its takaful unit to Ambank Group for a combined price of RM291 million.
The deal, which was announced in November 2008, is expected to be completed this month.
MAA Holdings, which has been in the red for the past three fiscal years, hopes to be profitable within the next two years.
The group's performance last year was affected by the poor investment climate, therefore detracting it from meeting an earlier forecast of posting profits in 2008.
"The investment environment impacted the group's investment yield and returns as it did with all predominantly insurance-based groups," Muhamad Umar said.
For its financial year ended December 31 2008, the group posted a net loss of RM70 million on a revenue of RM2.21 billion.
Muhamad Umar also said that total recoveries from the group's non-performing loans (NPLs) were RM251.58 million for the financial year ended 31 December 2008.
"As at end-December 2008, the total carrying amount of NPLs stood at RM450.48 million compared with RM649.92 million at end-December 2007. The 44.3 per cent improvement in net NPLs was a result of stronger debt collection and our ongoing recovery exercise," said Muhamad Umar.

MAA aims to maintain RM1b life policy sales: BT

MALAYSIAN Assurance Alliance (MAA Assurance) Bhd hopes to maintain its life insurance premium sales of RM1 billion for this year, says its top chief, reports Business Times (March 24, 2009).
"We are bullish on our sales as we anticipate take-up for protection plans to increase, and as we also shift our emphasis from selling single-premium policies," said its chief executive officer Muhamad Umar Swift at a press conference on the release of its latest endowment plan held at Kuala Lumpur yesterday.
Umar added that the finalisation of holding company MAA Holdings Bhd's deal with Ambank is expected to be completed within a month or so.
Ambank Group plans to buy MAA Holdings Bhd's general insurance unit for RM274.8 million and purchase a 4.9 per cent stake in the latter's takaful unit for RM16.2 million.
On its latest life policy "Super Fortune Plan", MAA Life Business Development Services vice-president Chan Yok Chor said he expects first-year premium sales of RM100 million, or 10 per cent of the life division's sales.
The plan allows policyholders to complete premium payments for the entire policy in either 6, 10, 15 or 20 years.
The plan caters to individuals aged between 10 and 55, and matures at the 50th or 80th birthday of the insured, depending on the entry ages.
It provides guaranteed annual cash payments at the end of the 10th policy year onwards and 120 per cent of the original sum assured will be paid upon maturity of the policy.
"We are targeting customers who are currently keeping their money in safe deposits and earning a minimal interest on their money as the policy provides protection and savings," said Chan.
Policyholders can also choose to enhance their basic cover by attaching additional rider policies such as medical plans.

Return to deposit insurance limit on the cards: THE STAR

THE global economy is expected to stabilise by the end of next year and Malaysia is likely to return to the previous deposit insurance limit from the current blanket guarantee on all deposits.
“The government guarantee is until the end of 2010, which means that over this period of time, depositors are fully protected. The blanket guarantee is a pre-emptive move. Part of our corporate plan this year and next will be transitioning from this blanket guarantee back to the limited protection by PIDM’’ said PIDM CEO Jean Pierre Sabourin, reports The Star (April 6, 2009).
Currently, that is limited to RM60,000 per depositor per bank, which is likely to be reviewed, depending on the circumstances.
That transition will be easier for Malaysia as it has maintained the RM60,000 guarantee by PIDM. Above that is guaranteed by the Government but administered by PIDM.
Hong Kong, Malaysia and Singapore have announced a blanket guarantee of two years. However, PIDM reviews the situation on an ongoing basis and will make its recommendation to the Government, the report added.
As part of a deposit insurance tsunami, countries had substantially raised the protection for depositors following the worst banking crisis that the world had not witnessed for a long time. The US raised its deposit insurance from US$100,000 to US$250,000 and Europe from 20,000 euros to 50,000 euros, then 100,000 euros. Australia, which never had deposit insurance, put in a blanket guarantee and was followed the next day by New Zealand and subsequently by Hong Kong, it added.
On Oct 16 last year, the report said Malaysia and Singapore announced a blanket guarantee on all deposits. Taiwan did the same thing and Indonesia’s protection for depositors went from US$8,500 to US$250,000.
“Once put in place, it will be difficult to remove,’’ said Sabourin. PIDM will maintain the RM60,000 and administer the government guarantee above this amount. Essentially, PIDM is responsible for the entire amount of deposits.
The report goes on to say:PIDM will soon charge a guaranteed fee to all its member commercial and Islamic banks for deposits above RM60,000 per depositor and for products not insured, for example, foreign currency deposits.
Apart from member banks, PIDM also charges the guaranteed fee on investment banks, international Islamic banks and deposit taking development financial institutions (DFIs).
“We will take that fee and pay it to the Government which is giving us the guarantee,’’ said Sabourin.
The task of building confidence is a serious matter at PIDM. It involves setting up public awareness campaigns, training at branches, meeting bank officers together with officers from Bank Negara, the Financial Mediation Bureau (FMB), credit counselling and management agency (AKPK) and meeting the public on how the entire system works.
Its brochures, annual reports and website come in several languages. For the call centre, toll free lines are available in four languages and main dialects. “This is what the Government should do ... (explain to people) as slowly as they require and in the language they understand.’’
“I feel confident (that we can deal with any crisis), with all the infrastructure in place and the vision in this country,’’ said Sabourin.
Together with deposit insurance, the system is backed by the AKPK, FMB, Islamic banking system, government stimulus package, guarantees and lately, the Corporate Debt Restructuring Committee (CDRC).
“It seems to me they have put in the whole package,’’ he said. “Everyone is working together. Banks are also working with their clients on any potential financial problems. “They invite customers to talk to them. In some other countries, people don’t even know who to call if they are losing their homes,’’ he said.
Globally, the response to the crisis has been two-pronged. Governments in Europe, Britain and the United States have been putting in a lot of liquidity and capital. The other approach, adopted by countries like Malaysia, is to put in place mechanisms to promote stability and public confidence.

Insurance firms see rise in claims: BT

General insurance companies are bracing for a rise in claims during the economic downturn, as they believe that hard times will lead to an increase in crime rate, reports Business Times.
Preventive maintenance is also likely to take a back seat as companies resort to cost cutting measures in the current economic environment, the General Insurance Association of Malaysia (PIAM) said.
"It is expected that the insurance industry will experience increases in vehicle theft, fire, robbery and other property theft claims," PIAM told via email the business section of the New Straits Times.
The report also had comments from a number of other industry players.
The report goes on:
ACE Synergy Insurance Bhd chief executive officer Raj Nanra added that deteriorating businesses, rising unemployment and crime rate are the most common phenomenon in challenging economic conditions.
"As this happens, it is natural to expect an increase in claims due to business closures and rising car and property theft," he said.
MAA Assurance Bhd's executive vice president of general claims management, Goh Ching On, said insurers expect to see an increase in moral hazards such as fire claims in a depressed economy.
As a result, PIAM said, the industry would normally respond by being more stringent in underwriting control and at the same time more vigilant in claims handling and investigation.
"Risk management measures will also be stepped up to deal with the potential risks factors," the association said.
Nanra added that claims ratio affects the overall capital of a company and ultimately its ability to meet the Risk Based Capital (RBC) requirement.
He said ACE, with an average claim ratio of about 28 per cent for the last five years, has a very strong balance sheet and its liquidity and net loss reserves for paying claims are exceptionally strong.
"In fact, we are well above the minimum capital requirement under the RBC regime," Nanra added.
MAA, with gross claims ratio of 63.1 per cent and incurred claims of RM234 million last year, said it will impose stringent underwriting guidelines by rejecting adverse risks.
For ACE Malaysia, containing rising claims will always remain a challenge and the industry needs to stay alert of changing trends and review existing methods. One way to do it is through education, Nanra added.
"Education will be the cornerstone in efforts to mold a society that frowns on insurance fraud. Society needs to understand, and be constantly reminded, of the high cost implications to business and by extension, to individuals in the community, if fraud is allowed to flourish," he said.
Insurers and adjusters, meanwhile, should ensure that their personnel have integrity, are technically sound and well experienced, Nanra said.