Tuesday, May 11, 2010

Manulife eyes smaller insurers

By Ishun P. Ahmad

Manulife Insurance Bhd, which has been on an organic growth path in the last five years, is now looking at buying smaller insurers as one of the ways to expand its market share and business.

“There will be consolidation and Manulife will be one of the consolidators,” said Manulife Insurance’s chief executive officer Kevin McWhinney.

He told The Malaysian Reserve in a recent exclusive interview that the insurance firm, whose listed parent is Manulife Holdings Bhd, is on the look out for an opportunity like buying into insurance companies that works well for its shareholders and be good for policy holders.

When asked if Manulife is open to buying insurance companies, McWhinney replied if the right opportunity presents itself, Manulife has the resources, capital, and the knowhow to integrate companies.

A case in point was when Manulife purchased John Hancock back in 2005.

“With the introduction of risk-based capital, there are players in the market today that have a decision to make whether if they would want to inject more capital into their companies or continue with their insurance business, if that is not their core business they will exit the market and concentrate on their core business. And so definitely those opportunities will present themselves, especially in the next couple of years,” said McWhinney.

According to McWhinney, Manulife has major initiatives to double its 2,000 strong agency force in the next three years with a record increase of 500 agents added in the last 15 months.

Apart from increasing its agency numbers, he said Manulife is looking to have more full time agents, that will have a multiplying effect on productivity and professionalism.

“Feeling the pickup in the market confidence and people interest to join Manulife, we are training people to be more full time professional advisors,” said McWhinney.

Furthermore, Manulife is also looking at growing its distribution by strengthening its agency force through increasing professionalism and productivity. “Last year 2009, Manulife experienced a 25% increase year-on-year, 1Q 2010 over 1Q 2009, on the agency side, which is already doubled the amount of production with overall sales up by 30%,” said McWhinney.

As of 3Q 2009, he said Manulife was at number 12 in terms of market share, and anticipates to move up two notches to 10th place in 2010.

The insurance firm is looking to step up more regional support centres and is actively looking at Kuching for its growing and young population, Penang Island for its mass affluent market, and Kota Kinabalu to increase its presence in East Malaysia.

“The investment is in the hiring of people, agents, and managers in the regional centres,” said McWhinney in regards to the cost of setting up the support centres.

Manulife has currently six of these centres that are also equipped with training facilities each located in Bukit Mertajam, Ipoh, PJ, KL, Johor, and Sibu.

McWhinney said Manulife will continue to focus on three segments that matter most to Malaysians, namely products relating to retirement plan, medical emergencies, and children's education plan. Furthermore, he said Manulife would also look into underserved markets like the Bumiputera market that has a very high potential due to its extremely low penetration rate as well as the underserved markets in the rural areas.

McWhinney commented that the industry has to deal with the high turnover of agents mainly due to the fact that the bulk are part timers and are more likely to be discouraged and less motivated. Malaysia has about 75,000 licensed agents, high in proportion to the country’s 27 million population.

McWhinney said the main challenge is to ensure insurance careers are a fulltime job and not seen as part time, adding that Manulife is tackling this issue head on, and believes in producing caring and professional advisors rather that “you get somebody paddle you a product“.

“Industrywide, we see agents that come and try out the business for a short period of time and because they don’t give it their full commitment, they may get discourage quickly and just return to their fulltime job and don’t pursue it,” he said.

[The Malaysian Reserve, 12 May 2010, page 1]

Deposit insurance limit to be increased

By Bhupinder Singh

The Perbadanan Insurans Deposit Malaysia (PIDM), which administers the deposit insurance system, is proposing to increase the deposit insurance limit from RM60,000 per deposit per member bank to RM250,000 per deposit per member bank effective January 2011.

The PIDM plans to advance a legislative package to the tabled in Parliament for debate and enactment before year-end as part of government backed measures to enhance financial consumer protection in the country.

The government deposit guarantee will lapse at the end of this year and the new guarantee limit proposed by PIDM will replace it as the higher limit level will provide protection to 99% of depositors.

The premium is paid by the financial institutions annually and the PIDM collected some RM131.8 million in premiums at the end of last year when its total Deposit Insurance Funds amounted to RM369.9 million, with the Conventional Deposit Insurance Fund totaling RM320.9 million and the Islamic Deposit Insurance Fund of RM49.0 million.

The PIDM intends to develop legislation to introduce an explicit Insurance Compensation Scheme (ICS) for insurance and takaful policy holders as well.

The ICS, which will be administered by PIDM, is a scheme designed to protect policy holders from the loss of their policy claims or insured benefits in the unlikely event of a failure of an insurance or takaful company.

Hence, the ICS will ensure policy holders of the 14.4 million or so policies in force till the end of 2009, be it insurance and takaful products, will also enjoy the same level of protection provided by PIDM to depositors of commercial banks and Islamic banks.

“The proposed ICS will enhance financial consumer confidence and promote consumer demand for insurance and takaful products,' PIDM said in a statement yesterday.

PIDM will hold discussions with the various stakeholders on the ICS before its tabled to the government.

[The Malaysian Reserve, 12 May 2010, page 1]

Friday, March 19, 2010

Takaful Ikhlas eyes rental, property investments

By Alfean Hardy

Takaful Ikhlas Sdn Bhd, which has invested RM97 million on two tower blocks in Bangsar South, Kuala Lumpur, is targeting similar investments going forward given the long-term sustainability of rental income for revenue generation, its president and chief executive officer Datuk Syed Moheeb Syed Kamarulzaman said.

The Islamic insurance firm used RM87 million of its policy holders’ funds to buy the commercial property and another RM10 million was invested in renovating both towers. The company has more than a million individual and group policy holders to date.

The unit of main boardlisted MNRB Holdings Bhd moved into all of Ikhlas Point Tower 11A and three floors of Ikhlas Point Tower 11 on Feb 1, 2010. Covering a built-up area of 99,286 sq ft in total, some 32,000 plus sq ft in one of the towers have been earmarked for rental/future expansion.
Speaking at a media briefing in Kuala Lumpur last Thursday, Syed Moheeb said, essentially, the buildings were not Takaful Ikhlas’s.
"These buildings were paid by policy holders’ funds coming from our risk fund. So, inevitably, the policy holders are the owners of the buildings, we’re merely renting it from them.
"We chose this strategy because we wanted to ensure rental income to policy holders and, over the last few years, one of the better revenue generating strategies is rental income, which is more sustainable over the long-term," he said.

Going forward, he said Takaful Ikhlas would make use of either shareholders’ funds or policy holders’ funds to purchase buildings and then rent them out to generate rental income.
"By doing this, we will slowly acquire property. Eventually, we also want to house all our branches in our own buildings. We’re not sure yet whether we will use funds from our shareholders or from our policy holders (when we buy these buildings)," he said, adding that Takaful Point was the firm’s first property investment.
Syed Moheeb said Takaful Ikhlas could have ventured into property investment earlier, but he felt that the firm needed to ensure that, whatever it bought, would have made an impact to investment income.
"The fact that (the two towers) have a capital appreciation of more than 20% indicates that this was a good decision.
"Among some of the things that we’re looking at will be rentable office premises and it won’t be anything else at this point in time. Our investment policy has been very cautious and has been more towards capital preservation and, in any thing that we do, we have to make sure that we don’t have to answer to any bad decisions later on," he said.
Syed Moheeb said Takaful Ikhlas was currently looking at housing two new branches in Klang, Selangor, and Kuala Terengganu, Terengganu, by middle of the year in new properties.
"At this point in time we haven’t identified yet any properties yet (for these two new branches). If you look at the 10 branches that we have currently, these are the areas that we would be looking to make investment opportunities," he said.
The Islamic insurer currently has branches in Kota Baru, Johor Baru, Sungai Petani, Ipoh, Kuching and Kota Kinabalu in Kelantan, Johor, Kedah, Perak, Sarawak and Sabah respectively. Asked on how much would be set aside for Takaful Ikhlas’s property buy war chest going forward, Syed Moheeb said the company’s investment strategy was set by the board, which decides how much went into equities, governmentbacked securities and others.
"Where property is concerned, we’re looking at not more than 20%. In the shorter term at least, until our financial year ending Mar 31, 2011, we will cap this at 20%," he said.

(This story appeared in The Malaysian Reserve on 1 March 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh, at http://islamicfinanceasia.blogspot.com/)