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/)
Showing posts with label Malaysia. Show all posts
Showing posts with label Malaysia. Show all posts
Friday, March 19, 2010
Sunday, August 2, 2009
Zainuddin: From humble beginnings to moving mountains
By Alfean Hardy
Options were not plentiful if you were a secondary school graduate in Rembau, Negri Sembilan, in the late 70s. According to HSBC Amanah Takaful (Malaysia) Sdn Bhd executive director and chief executive officer Zainuddin Ishak, the most most people could look forward to was working in a factory in Senawang.
"My father was a rubber tapper and my mother a housewife. There were eight of us in the family and life at that time was borderline poverty or poverty. I went to a kampung school in Rembau and graduated from a secondary school that was also in Rembau," he told The Malaysian Reserve recently.
With no career advisers around to guide an impressionable youth from a large family, perhaps that was where Zainuddin would have ended up. It was sound advice from his eldest brother, a former Institut Teknologi Mara (ITM) student, that changed his life. "He advised me to take up an insurance qualificaion. He told me it was a very difficult course, an external course with the professional papers coming from the UK.
"He said that amongst his friends who managed to clear some of the papers, and not the full syllabus, made it big time in the insurance industry. So, I said to myself, it sounds good, make money, why not," he added. This, Zainuddin said, was in 1984.
"To cut a long story short, I got accepted into ITM (now known as Universiti Teknologi Malaysia, or UITM). Prior to doing the associate (paper), you had to sit for the certificate. "There were 80 of us in that batch class of 1984 sitting for the certificate. Only 30 went on to do the associate. Of that, only four of us made it through," he added.
Zainuddin said, those who did not clear the associate papers could still get a decent job. For him, though, the challenge of being able to take on a difficult endeavour was a prime motivator and it was this drive within him, he felt, that helped him make it all the way through. "I made it, not because I'm clever, but because I've always had the tenacity and the stamina to complete any task placed before me. I guess that's my strong point. The more difficult it is, the more determined I am to clear the hurdles," he said.
The start of a long and fruitful career in the industry began in 1989, as a management trainee at Aviva with the possibility of getting a full time job within six months. Unfortunately for Zainuddin, this opportunity came at the tail end of a recession, which spelled stiff competition for a permanent position. "When I first joined the industry, because (of the) recession, there were a lot of unemployed people in the industry. There was big competition to get a permanent position (in Aviva) but the internship gave me the opportunity to work in a world-class organisation.
"My first real job was after that, as a full executive, was with a company owned by Kompleks Kewangan in the early 1990s called Trust International Insurance (TII), developing a bancassurance channel for the company. "I got my exposure in sales in the insurance industry," he added. That break with TII was pivotal for Zainuddin. After three years, he went on to join Norwich Winterthur before moving on to Malaysia National Insurance Bhd (MNI) and eventually to American National Insurance, which was owned by the New Straits Times Press Bhd (NSTP) group at the time. "I stayed there for a long while. What changed was the company. Because of a series of acquisitions, from NSTP to Bank of Commerce to CIMB, I stayed with one company that changed its shareholders until I became chief executive officer of CIMB Bank Aviva Takaful," he added.
All in all, Zainuddin stayed with the firm for almost 14 years, slowly and steadily moving up the ranks every two years or so. Eventually, though, it was the challenge of something new that attracted him to make the change in mid-January 2009. "If you look at the takaful industry, there are various stages of maturities amongst the eight companies here. HSBC clearly has gone through its crucial, formative stage.
"When you're at the formative stage, it's good to have internal people because you understand the people and the culture.
"When you want to take it to the next stage, you need to get outside people and bring in the industry expertise to come in and take a company to the next level. "I felt that this was a good time for me to come in and bring the company to that next level. HSBC is an admired brand and it gives you more opportunities and avenues to grow," he said. Formed in 2006, HSBC Takaful is a joint venture (JV) that is 49%-owned by HSBC Insurance (Asia Pacific) Holdings Ltd, 31%-owned by Jerneh Asia Bhd and 20%-owned by the Employees Provident Fund (EPF).
To Zainuddin, his challenge for this relatively new venture was to take it to the next level. "In everything, nothing is ever good enough. Every day is a challenge, nothing is ever good enough. Every day you're looking at opportunities to improve from yesterday.
"We're always improving. It's always the next level, it's always a moving target. You've got lots of room to improve. Every day is about improving what we are today," he said.
"Another challenge is to bring takaful to the HSBC world because Malaysia is the first takaful outfit (within the group) and vice versa. "We need, (and) the industry certainly needs, big names like HSBC to champion takaful so that it will make takaful very prominent. That's my challenge, how to fulfill the vision, the set of targets, etc," he added.
The task for the boy from Rembau is certainly a challenging one, what with a very competitive industry and a global economy that has a bad case of the flu but, somehow, you sense that, with his drive, determination and desire to succeed, Zainuddin will certainly move mountains to get the job done.
(This story appeared in The Malaysian Reserve on July 22, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Prudential’s biggest ad campaign
Prudential Assurance Malaysia Bhd has allocated RM7mil for its biggest advertising campaign to-date to promote its new medical insurance plan, PRUhealth, reports The Star (July 18, 2009).
According to chief marketing officer Thomas Wong, the campaign starting July 20 via television, radio, print and outdoor advertising, is expected to generate a considerable amount of interest for the unique medical insurance plan, which rewards policyholders for staying healthy by giving them no claims bonus.
“We expect to secure a large proportion of new and existing customers for this first of its kind product in the market,” he said. One of the biggest medical insurers in Malaysia, Prudential paid a third of the industry’s medical costs last year, which amounted to RM900mil, the newspaper reported.
According to chief marketing officer Thomas Wong, the campaign starting July 20 via television, radio, print and outdoor advertising, is expected to generate a considerable amount of interest for the unique medical insurance plan, which rewards policyholders for staying healthy by giving them no claims bonus.
“We expect to secure a large proportion of new and existing customers for this first of its kind product in the market,” he said. One of the biggest medical insurers in Malaysia, Prudential paid a third of the industry’s medical costs last year, which amounted to RM900mil, the newspaper reported.
Wednesday, July 15, 2009
MMIP insurance covers now available at Pos Malaysia outlets
The Persatuan Insurans Am Malaysia (Piam) last week announced that Malaysian Motor Insurance Pool (MMIP) insurance covers will be available to the public at Pos Malaysia outlets, confirming an earlier report by The Malaysian Reserve.
With effect from July 10, it said private car and motorcycle owners can purchase MMIP's insurance covers from Pos Malaysia outlets throughout the country including Sabah and Sarawak.
In order to immediately address accessibility problems in Sabah and Sarawak, it said insurance for taxis and buses will also be made available from the same day, while those in Peninsula Malaysia from July 24.
"In the current scenario where the motor insurance market is experiencing high loss experience, many insurers have either declined or are scaling back on underwriting risks especially third party insurance. As such, an increasing number of motorists are turning to the MMIP for insurance cover," Piam said in the statement.
On July 23, The Malaysian Reserve reported that the central bank was on the verge of appointing Pos Malaysia Bhd as the agent for motorists to buy motor insurance from the industry pool, now that most insurers have declined to underwrite directly that segment of the insurance market.
It was reported that Pos Malaysia, the national postal services provider which has been in the red for financial years 2007 and 2008, will secure the contract to ensure that motorists are able to secure the third party insurance cover.
In the past weeks, more and more motorists found themselves turned away by their insurer when they wanted to renew their third party cover. Instead, they were told to shop around at other insurance companies that may still underwrite that segment, but to little avail as most general insurers and takaful operators have stopped underwriting directly the risk due to the segment's high loss experience.
In light of the increasing difficulty, Bank Negara Malaysia (BNM) which regulates the insurance and takaful industry had turned to Pos Malaysia to act as an agent on behalf of the motor insurance pool, the insurer of the last resort.
In its statement, Piam said in order to provide convenience and accessibility to the public, MMIP and Pos Malaysia have formed a strategic partnership to capitalise on Pos Malaysia's extensive network of offices throughout the country, in both the urban and rural areas. Pos Malaysia has 684 outlets nationwide which will provide MMIP insurance with 578 outlets in Peninsula Malaysia and 106 in Sabah and Sarawak, it said.
Furthermore, it said Pos Malaysia already has the necessary experience, human resources and IT facilities in place to provide the MMIP's insurance covers.
"This service will be an extension of the existing insurance renewal service that is already available at Pos Malaysia outlets as it currently acts as agents for eight insurance companies and three takaful operators," it said. In addition to insurance renewal, it said Pos Malaysia also offers the renewal of road tax for private vehicles on behalf of Road Transport Department. The MMIP was formed in 1992 to ensure that all vehicles on the road would not be without access to the minimum motor insurance cover required by law.
The MMIP also provides insurance for vehicles that are considered high risks and are unable or have difficulty in securing motor insurance from the normal market.
The liabilities and expenses of the MMIP are shared equally by all the 33 general insurance companies. Currently, the MMIP utilises the branch office networks of two insurers, Multi-Purpose Insurans Bhd and Uni Asia General Insurance Bhd, who serve as the servicing insurers for MMIP. Both these servicing insurers will continue to provide MMIP insurance covers together with the Pos Malaysia outlets.
(This story appeared in The Malaysian Reserve on July 13, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
With effect from July 10, it said private car and motorcycle owners can purchase MMIP's insurance covers from Pos Malaysia outlets throughout the country including Sabah and Sarawak.
In order to immediately address accessibility problems in Sabah and Sarawak, it said insurance for taxis and buses will also be made available from the same day, while those in Peninsula Malaysia from July 24.
"In the current scenario where the motor insurance market is experiencing high loss experience, many insurers have either declined or are scaling back on underwriting risks especially third party insurance. As such, an increasing number of motorists are turning to the MMIP for insurance cover," Piam said in the statement.
On July 23, The Malaysian Reserve reported that the central bank was on the verge of appointing Pos Malaysia Bhd as the agent for motorists to buy motor insurance from the industry pool, now that most insurers have declined to underwrite directly that segment of the insurance market.
It was reported that Pos Malaysia, the national postal services provider which has been in the red for financial years 2007 and 2008, will secure the contract to ensure that motorists are able to secure the third party insurance cover.
In the past weeks, more and more motorists found themselves turned away by their insurer when they wanted to renew their third party cover. Instead, they were told to shop around at other insurance companies that may still underwrite that segment, but to little avail as most general insurers and takaful operators have stopped underwriting directly the risk due to the segment's high loss experience.
In light of the increasing difficulty, Bank Negara Malaysia (BNM) which regulates the insurance and takaful industry had turned to Pos Malaysia to act as an agent on behalf of the motor insurance pool, the insurer of the last resort.
In its statement, Piam said in order to provide convenience and accessibility to the public, MMIP and Pos Malaysia have formed a strategic partnership to capitalise on Pos Malaysia's extensive network of offices throughout the country, in both the urban and rural areas. Pos Malaysia has 684 outlets nationwide which will provide MMIP insurance with 578 outlets in Peninsula Malaysia and 106 in Sabah and Sarawak, it said.
Furthermore, it said Pos Malaysia already has the necessary experience, human resources and IT facilities in place to provide the MMIP's insurance covers.
"This service will be an extension of the existing insurance renewal service that is already available at Pos Malaysia outlets as it currently acts as agents for eight insurance companies and three takaful operators," it said. In addition to insurance renewal, it said Pos Malaysia also offers the renewal of road tax for private vehicles on behalf of Road Transport Department. The MMIP was formed in 1992 to ensure that all vehicles on the road would not be without access to the minimum motor insurance cover required by law.
The MMIP also provides insurance for vehicles that are considered high risks and are unable or have difficulty in securing motor insurance from the normal market.
The liabilities and expenses of the MMIP are shared equally by all the 33 general insurance companies. Currently, the MMIP utilises the branch office networks of two insurers, Multi-Purpose Insurans Bhd and Uni Asia General Insurance Bhd, who serve as the servicing insurers for MMIP. Both these servicing insurers will continue to provide MMIP insurance covers together with the Pos Malaysia outlets.
(This story appeared in The Malaysian Reserve on July 13, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Thursday, July 9, 2009
Exim Bank to introduce takaful products next yr
Export-Import Bank of Malaysia Bhd (Exim Bank) is poised to expand its reach further by offering better options to customers via the introduction of Shariah-compliant products.
Islamic financing has been identified as a new area of growth for the bank in view that Malaysia is expanding trade involving the Organisation of Islamic Countries (OIC) member states.
The bank has envisaged that by end-2009, it would have sufficient Shariah-compliant banking products to cater for the needs of its growing global customers, said managing director/CEO Mohd Fauzi Rahmat.
"We are also planning to introduce takaful (Islamic insurance) products by next year," he said in a statement on Monday.
Exim Bank supports the financing needs of Malaysian companies and investors with operations in four continents across two dozen countries worldwide. Asean and Middle East will continue to be major contributors to the bank's portfolio with about two-third of its exposures while Africa, Europe and Asia Pacific make up the rest.
According to Fauzi, the bank is committed to continue its drive to support local exporters and investors extending their international business by providing banking facilities and insurance coverage particularly those that significantly contribute to the extension and enlargement of Malaysia's export volume, value and markets.
While the bank recognise that 2009 would be more a challenging year amidst global economic uncertainties, it would continue to provide support to its existing and potential customers and partners who are willing to take the challenge and participate in the still significant global trade and investments and to be ready for future businesses when the economy picks up.
In 2008, Exim Bank approved a total of RM460.3 million direct loans and guarantees to customers in various sectors including construction, investment, manufacturing and commodity trading.
In addition, the Export Credit Refinancing, extended via participating financial institutions and by far the single largest product of the bank by volume, contributed a total of RM9.5 billion in loan disbursements compared with RM8.4 billion in the previous year.
In trade credit insurance, it has a total of RM2.43 billion business in force in 2008, against RM2.78 billion in 2007. As for commercial and political risk insurance business, the bank approved RM120 million worth of business last year reflecting it cautious approach in light of the global economic crisis.
The total Malaysian exports insured for 2008 amounted to RM2.55 billion and is spread over 72 countries primarily across Asia and Africa.
"Exim Bank maintained a positive and stable performance for both banking and insurance businesses although a more selective approach has been adopted to respond to the current global economic situation," Fauzi said.
To strengthen its capacity to undertake more businesses, the shareholders' funds of Exim Bank has increased to RM2.8 billion in 2008 from RM839 million a year ago. This would go a long way in ensuring that Exim Bank continues to thrive as a vibrant and active Development Financial Institution for Malaysian exporters and investors over the medium and long-term.
(This story appeared in The Malaysian Reserve on July 8, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Takaful Malaysia eyes 50% market share in 2-3 years
By T Vignesh
Syarikat Takaful Malaysia Bhd (Takaful Malaysia) expects to capture slightly more than half of the takaful industry's total asset market share in the next two to three years despite the current economic crisis. Managing director Datuk Mohamad Hassan said the industry's total assets have reached RM12 billion and the company's share currently stands at RM4.05 billion.
"We are confident of achieving slightly more than the current takaful market rate, which is between 22% and 25% per annum," he told reporters after a signing ceremony with Standard Financial Planner Sdn Bhd (SFP) in Kuala Lumpur yesterday.
Takaful Malaysia became the first in the takaful industry to add professional financial advisors to its existing portfolio of distribution channels following the appointment of SFP to market its products. SFP has a nationwide network of more than 300 representatives of whom 75 are licensed financial advisors with Bank Negara Malaysia.
Mohamad Hassan said that this will enhance the penetration of the company's family and general insurance products into the middle-upper Malaysian market, thereby makes Takaful Malaysia's products more accessible to a wider customer base.
He said the company is confident of the selection of SFP due to its position as a market leader and largest independent financial advisory group in Malaysia. S FP is also the first financial planning group in Malaysia to hold both Financial Advisors (FA) and Corporate Unit Trust Advisor (CUTA) licences.
At the signing ceremony, SFP's CEO Alfred Sek said the past ten years have witnessed fresh changes to the financial planning industry and its delivery of financial advice in Malaysia.
He said that Takaful Malaysia will greatly benefit from this arrangement as its potential customers will develop full confidence in the products offered, through high quality independent advice from these Financial Advisors.
Meanwhile, Takaful Malaysia has plans to undertake a rebranding exercise to reflect its fresh characteristics in conjunction with its 25th anniversary this year.
(This story appeared in The Malaysian Reserve on July 8, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Syarikat Takaful Malaysia Bhd (Takaful Malaysia) expects to capture slightly more than half of the takaful industry's total asset market share in the next two to three years despite the current economic crisis. Managing director Datuk Mohamad Hassan said the industry's total assets have reached RM12 billion and the company's share currently stands at RM4.05 billion.
"We are confident of achieving slightly more than the current takaful market rate, which is between 22% and 25% per annum," he told reporters after a signing ceremony with Standard Financial Planner Sdn Bhd (SFP) in Kuala Lumpur yesterday.
Takaful Malaysia became the first in the takaful industry to add professional financial advisors to its existing portfolio of distribution channels following the appointment of SFP to market its products. SFP has a nationwide network of more than 300 representatives of whom 75 are licensed financial advisors with Bank Negara Malaysia.
Mohamad Hassan said that this will enhance the penetration of the company's family and general insurance products into the middle-upper Malaysian market, thereby makes Takaful Malaysia's products more accessible to a wider customer base.
He said the company is confident of the selection of SFP due to its position as a market leader and largest independent financial advisory group in Malaysia. S FP is also the first financial planning group in Malaysia to hold both Financial Advisors (FA) and Corporate Unit Trust Advisor (CUTA) licences.
At the signing ceremony, SFP's CEO Alfred Sek said the past ten years have witnessed fresh changes to the financial planning industry and its delivery of financial advice in Malaysia.
He said that Takaful Malaysia will greatly benefit from this arrangement as its potential customers will develop full confidence in the products offered, through high quality independent advice from these Financial Advisors.
Meanwhile, Takaful Malaysia has plans to undertake a rebranding exercise to reflect its fresh characteristics in conjunction with its 25th anniversary this year.
(This story appeared in The Malaysian Reserve on July 8, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Wednesday, July 8, 2009
Axa Affin sees plenty of potential post liberalisation
By Alfean Hardy
Axa Affin Life Insurance Bhd, a local-international joint venture (JV), sees a lot of potential for itself going forward in the new climate of liberalisation in the finance and insurance sectors, and is making plans to tap into these opportunities, its chief marketing officer Nicholas Kua Choo Ming said.
Despite being a relatively young start-up, Axa Affin sees a lot of opportunities to tap into going forward.
"When the liberalisation was announced, there were reports that spoke of opportunities for foreign players and that local players would feel more pressure," Kua said. "For Axa Affin, we see it as an opportunity. Granted that we're a start-up and we're entering into a new era of liberalisation, (but) we have a head start over new entrants coming in.
"We are already operating and, with our business model, we can outpace our competitors in terms of growth and emerge stronger and in a better position," he told The Malaysian Reserve in Kuala Lumpur recently.
Axa Affin is 51%-owned by local giant Affin Holdings Bhd and 49%-owned by global financial protection and wealth management giant Axa Group. The JV was incorporated in early 2006. Previously, both parties had been collaborating in the general insurance area for many years. Under the liberalisation of the finacial sector announced in April 2009, foreign equity participation in insurance and takaful JVs was raised to 70%. In addition, locally-incorporated foreign insurance and takaful companiess are now allowed to establish branches nationwide without restriction, while the restriction for such firms to enter into bancassurance/bancatakaful arrangements with banking institutions have also been lifted. Axa Affin's strengths, Kua said, stemmed from having strong parents.
"We're part of a very strong group, the Axa Group, which is a leading global player, and we have a strong shareholder in Affin," he said. "We are able to leverage on Axa's expertise and its robust business platform. We have access to eight other operating entities in Asia like China, India and Hong Kong. "Whether it's product innovation, distribution management and customer services, we have best practices that we can follow," he said.
"As part of the LTAT Group, Affin's business is across almost the entire Malaysian landscape and there are major opportunities to work with local groups, either via their group insurance or banking group," he said, adding that about half of Affin Bank's 80-plus branches already have dedicated Axa Affin advisers attached to them, making it the only bancassurance relationship of its kind currently. "And, as Affin expands, we will expand with them," he said.
Kua said one of the challenges going forward was building its distribution channel, which mostly consisted of its agency force and its bancassurance relationship with Affin Bank and other bank partners. "One of the challenges is growing our agency manpower. We're above 300 now and we aim to hit the 1,000 threshold by the end of the year," he said. He also said that the firm is upgrading the capabilities of its agency force to eventually see a fully professional force. The target time frame is by 2012, to coincide with Axa's global aspirations to be the preferred company of choice by then. Kua said Axa Affin was also able to sign up with other banks under a multi-provider bancassurance model.
"We are currently working with three or four other partners. With liberalisation, the key now is how we work with these banks (who have other providers as well) and make ourselves the preferred provider," he said. "Axa, on a regional basis, has always believed in a multi-distribution platform. The same is true whether we're in Thailand, the Philippines, Hong Kong or Indonesia. "We have both bank partners and the agency force. The blue print is there, (and) the business model is there in every entity that we enter into," Kua said.
(This story appeared in The Malaysian Reserve on July 8, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Sunday, July 5, 2009
Perwakim submits memorandum on motor insurance rebates
PERWAKIM, an association of general insurance agents in Malaysia, has submitted a memorandum to Bank Negara protesting the central bank's proposal to give rebates on premiums for consumers that renew their motor insurance directly with insurance firms, reports Business Times.
They claim that the move, which takes effect from today, would adversely affect consumers, agents and the insurance industry in general.
Perwakim president Liza Lau said a copy of the memorandum was also handed to the office of Prime Minister Datuk Seri Najib Tun Razak, the Ministry of Finance and Ministry of Human Resources.
Lau led more than 50 agents in a peaceful picket in front of Bank Negara yesterday. The crowd dispersed after about two hours.
She said there are a total of 50,000 insurance agents nationwide of which 40 per cent are full-time agents.
Insurance agents earn a 10 per cent commission from the insurance companies.
They claim that the move, which takes effect from today, would adversely affect consumers, agents and the insurance industry in general.
Perwakim president Liza Lau said a copy of the memorandum was also handed to the office of Prime Minister Datuk Seri Najib Tun Razak, the Ministry of Finance and Ministry of Human Resources.
Lau led more than 50 agents in a peaceful picket in front of Bank Negara yesterday. The crowd dispersed after about two hours.
She said there are a total of 50,000 insurance agents nationwide of which 40 per cent are full-time agents.
Insurance agents earn a 10 per cent commission from the insurance companies.
Tuesday, June 23, 2009
Asia attractive to major players
IN THE PHOTOGRAPH: (from left) LIAM president Md Adnan Md Zain, Kerzner, Bank Negara Malaysia assistant governor YBhg Dato' Muhammad Ibrahim and Malaysian Host Committee chairman Ng Lian Lu at the 17th Limra/Loma Strategic Issues Conference held in Kuala Lumpur recently
By Alfean Hardy
Asia's relatively young and large population and its growing middle class have made the region an attractive venture for many North American and European life insurance companies looking for opportunities amidst the current economic downturn, Limra, Loma and LL Global Inc president and chief executive officer Robert Kerzner said.
Limra is an association that provides research, consulting and other services to the insurance and financial services sectors. Loma is an international association of insurance and financial services companies. LL Global is their parent organisation.
In his speech at the 17th Limra/Loma Strategic Issues Conference held in Kuala Lumpur recently, Kerzner said, over the last few weeks, capital has once again begun to flow and US firms like Prudential Financial and Metropolitan Life Insurance Co have been raising capital via stock and/or debt offerings, which he sees will help fuel future growth in the global insurance sector. As the sector transforms, he said many firms will begin to decide in which market and country they would want to play.
"Many will look to Asia. What we're seeing worldwide, major players are pulling out of some major green field markets and are choosing to play much harder in others. And it's clear that the growth of the next decade is clearly much more focussed in Asia than the US or Western Europe," he added.
Kerzner said, with the renewed capital within the system, many chief executive officers of major US companies have expressed an intent to make use of the global financial crisis to gain ground and grow market share over their competitors.
"In the US, 79% of chief financial officers (CFOs) say they want to buy life (insurance) companies and 75% want to buy the group operations.
"At the same time, they have their eyes clearly on Asia. Prudential has already bought one company in Japan and is rumoured to be looking at others. At the same time, the president of Metropolitan said he would sleep better at night if they owned another asset in Japan," he added. Speaking to reporters later, Kerzner said Asia's large population and not as mature markets meant there were more opportunities to sell a whole array of products.
"In many Asian countries, you have an ageing population and, there by all accounts, there's simply been not enough money saved for retirement, and this was prior to the crisis," he said.
"Also, Asia has many who are coming into the new middle market of having more assets and your economy is growing wealth at a faster pace and so there's a broad need for more products that life insurance companies have. When you look at the demographics across Asia, over time, the outlook is optimistic," he added.
All countries within Asia, Kerzner said, are attractive. "Japan is mentioned more often because, for some of the western companies have a better understanding of the Japanese economy and there's a more immediate need for retirement products (given its large ageing population) there," he said.
"But I think you're going to see the Europeans, in particular, and the North Americans look broadly within Asia. "When I talked about green field operations of the Europeans being closed down, that may mean more focus is given here in the Asian countries and choose to be a fierce competitor in the markets that they've decided are crucial.
"Also, there's also a history that shows that, when one or two of these (Asian expansions) are announced, then others will feel the need to get in before it's too late. "You could see, over the next year, as capital frees up and companies look to where they really want to expand strategically, then you will see Asia becoming a focus again," he added.
Kerzner said regulatory restrictions and competition would not be major hurdles for western life insurance companies venturing into Asia as many of these firms have already operated in regulated industries in the west.
"The major barrier to entry is culture and really understanding what's crucial within each individual Asian country," he said.
"If you look at history, many have entered the US and Western European markets, that's because that's where there's been a great deal of wealth. "I think companies have traditionally looked at where the needs are the greatest but where's the most activity versus longer-term involvements in countries that will be slower to grow.
"I also think, if you look at Asia, the companies that have done well in Asia for many years, particularly those not based within the Asia region have a stong base in (Asian) countries and, as the country grew, they grew as well.
"So, I believe the new entrants will tend to sometimes look for the more matured markets but those who look for a long-term view will look at the more emerging markets and take more of a five, 10, 15-years view," he added. Kerzner said it had been the European global players that have had the broadest reach worldwide.
"I can't comment on specific companies but if you look at announcements made last week in China and Taiwan, you are seeing and will see many, many more deals being announced or at least companies buying lines of businesses and licenses to expand and leave open opportunities for the future," he added
(This story appeared in The Malaysian Reserve on June 24, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Life insurers urged to focus on fundamentals to ride out storm
By Alfean Hardy
The Life Insurance Association of Malaysia (LIAM) is calling upon the life insurance sector to remain focussed on the industry's key fundamentals in order to ride out the global financial crisis and its president, Md Adnan Md Zain, is predicting single digit growth for the sector in spite of the current economic climate.
In a speech at the 17th Strategic Issues Conference in Kuala Lumpur yesterday, Md Adnan said 2008 had been a challenging year for the indusry, given a global financial turmoil that has been considered the worst since the Great Depression of the 1930s.
"Nevertheless, there are always sliver linings that will appear with untapped business opportunities, multiplied with unexpected growth possibilities. By focussing on key fundamentals, including sound risk management, highly prudential and regulatory standards, and strong corporate governance, we are confident that we'll be able to ride out this stormy crisis," he added.
Speaking to reporters later, Md Adnan said that the country had benefited from steps undertaken by the authorities, like the adoption of the risk-based capital framework in January 2009, which aimed to create a strong risk management structure.
"Players are now more mindful that of ensuring that they put in place good processes and proper management practices to be able to bring out strengths in various areas for the betterment of themselves and their policyholders and, that in itself, will make the players perform at far higher standards," he added.
Md Adnan, who is also the chief executive officer of MCIS Zurich, said the life insurance sector has also been helped by a public at large that has come to a great understanding on the importance of life insurance in their lifes, barring investment-linked products.
"Even as we speak, the economic situation is the one that is not encouraging. Yet, there's still growth in the life insurance industry. Perhaps, because of the investment climate, investmentlinked products may not be featuring very well in terms of growth but the traditional life insurance is still showing good developments. People are still buying insurance. That clearly shows the knowledge, the awareness and people are recognising the importance of life insurance, both in terms of protection as well as savings. Medical is also another area that is shifting up well. And, for a country like ours, these are areas that will really see more growth opportunities with the growing population and the understanding of needs of people protecting themselves. Medical costs are also increasing and people have become more conscious of the good of insurance to provide them with a good position to provide for themselves and their families through insurance coverage," he added.
Md Adnan said, to question about growth forecast for the sector this year was his personal view that the life insurance sector would see single digit growth this year.
"We have been having some double digit growth in the past. You will see growth but it will be single digit growth," he said. "For traditional life insurance, growth is fairing much better. but investment linked is slowing down. It's cyclical and with the measures being undertaken by the authorities, in ensuring the stability of the economy, it's a matter of time that you will find the positive changes taking place and that will again bring back the confidence in the investmentlinked segment," he added.
(This story appeared in The Malaysian Reserve on June 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
The Life Insurance Association of Malaysia (LIAM) is calling upon the life insurance sector to remain focussed on the industry's key fundamentals in order to ride out the global financial crisis and its president, Md Adnan Md Zain, is predicting single digit growth for the sector in spite of the current economic climate.
In a speech at the 17th Strategic Issues Conference in Kuala Lumpur yesterday, Md Adnan said 2008 had been a challenging year for the indusry, given a global financial turmoil that has been considered the worst since the Great Depression of the 1930s.
"Nevertheless, there are always sliver linings that will appear with untapped business opportunities, multiplied with unexpected growth possibilities. By focussing on key fundamentals, including sound risk management, highly prudential and regulatory standards, and strong corporate governance, we are confident that we'll be able to ride out this stormy crisis," he added.
Speaking to reporters later, Md Adnan said that the country had benefited from steps undertaken by the authorities, like the adoption of the risk-based capital framework in January 2009, which aimed to create a strong risk management structure.
"Players are now more mindful that of ensuring that they put in place good processes and proper management practices to be able to bring out strengths in various areas for the betterment of themselves and their policyholders and, that in itself, will make the players perform at far higher standards," he added.
Md Adnan, who is also the chief executive officer of MCIS Zurich, said the life insurance sector has also been helped by a public at large that has come to a great understanding on the importance of life insurance in their lifes, barring investment-linked products.
"Even as we speak, the economic situation is the one that is not encouraging. Yet, there's still growth in the life insurance industry. Perhaps, because of the investment climate, investmentlinked products may not be featuring very well in terms of growth but the traditional life insurance is still showing good developments. People are still buying insurance. That clearly shows the knowledge, the awareness and people are recognising the importance of life insurance, both in terms of protection as well as savings. Medical is also another area that is shifting up well. And, for a country like ours, these are areas that will really see more growth opportunities with the growing population and the understanding of needs of people protecting themselves. Medical costs are also increasing and people have become more conscious of the good of insurance to provide them with a good position to provide for themselves and their families through insurance coverage," he added.
Md Adnan said, to question about growth forecast for the sector this year was his personal view that the life insurance sector would see single digit growth this year.
"We have been having some double digit growth in the past. You will see growth but it will be single digit growth," he said. "For traditional life insurance, growth is fairing much better. but investment linked is slowing down. It's cyclical and with the measures being undertaken by the authorities, in ensuring the stability of the economy, it's a matter of time that you will find the positive changes taking place and that will again bring back the confidence in the investmentlinked segment," he added.
(This story appeared in The Malaysian Reserve on June 23, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Monday, June 15, 2009
Motor insurance needs an overhaul
By Habhajan Singh
Motor insurance in Malaysia requires a serious overhaul, with the perennially unprofitable third party coverage demanding a separate treatment altogether, says a senior industry executive.
The issue has come to a boil for general insurers and takaful providers active in the motoring sector, with most of them now no longer providing third party motor insurance coverage due to the high claims ratio.
"I'm proposing a rethink of our Road Transport Act 1987 and a review of the motor insurance policy. A new government agency should be set up to handle at least the Act cover, while redesigned insurance policies should only cover one's own damage, leaving third party claims to the agency. An industry pool could provide base underwriting," said Datuk Syed Moheeb Syed Kamarulzaman, the newly appointed chairman of the Malaysian Takaful Association (MTA).
Under this proposal, a new industry pool would be setup to manage third party made compulsory by the Act, commonly referred to as the Act cover.
Here, Syed Moheeb proposes that each vehicle licensed holder should contribute individually to the pool. Currently, third party insurance is pegged to the vehicle, irrespective of the number of drivers nor the name it is insured under. A family car may be insured under the head of the family, when in fact it could be driven by all children. This could result in a situation of inadequate premium against the risks exposed.
The suggestion by the seasoned insurer is for everyone with a valid licence to bear a portion of the risk.
"When you pay for your motor licence, a portion automatically goes to cover third party claims. This way, the third party risk is automatically handled by the new pool," said Syed Moheeb who is also the president and chief executive officer of Takaful Ikhlas Sdn Bhd.
This would also mean insurers and takaful operators will only provide coverage for claims other than those mandated under the Act.
The pool could replace the Malaysian Motor Insurance Pool (MMIP), a high-risk insurance pool run collectively by the industry under orders from the regulators, which acts as the insurer of last resort.
Under the present set-up, when a vehicle owner is unable to get any insurer to provide him liability cover for third party, MMIP would step in to provide the cover, at a rate higher than what insurers are allowed to charge. Industry players have been lobbying for years to change the tariff-driven premium structure for motor insurance, claiming that providing coverage mandatory under the Act is almost a sure loss-making proposition.
The move has not yielded results thus far, industry executives said.
"So far, we have been looking at tweaking insurance premiums rather than changing the whole structure. Perenially, we have a problem of inadequate premiums to pay for the increasing third party claims.
"This year, several insurers have found it difficult to continue writing third party risks. So, if we want different results, we need to do things differently. We need to reengineer. This suggestion, if it happens, will be headed by a new body supported by the government," said Syed Moheeb.
Syed Moheeb, a seasoned insurer with experience in reinsurance, was involved some years ago when the general insurance association, Persatuan Insurans Am Malaysia (Piam), was actively discussing with Bank Negara Malaysia (BNM) suggested changes to the motor insurance premium tariffs.
In the meantime, industry executives said writing third party motor cover had become more and more untenable from the profit standpoint, forcing players to steer clear of the segment.
On May 27, The Malaysian Reserve reported that insurance companies are no longer willing to provide third party motor insurance under their banner, thus sending their customers to the highrisk insurance pool instead.
On June 1, this newspaper also reported that Pacific & Orient Insurance Co Bhd (P&O Insurance), one of the local top guns in motor insurance, was set to pull out completely from the third party motor insurance segment, following the trend of other insurance providers in Malaysia who have stayed clear of the sector.
The general insurer, a subsidiary of listed Pacific & Orient Bhd (P&O), was second only to Kurnia Insurans (M) Bhd for underwriting third party motor insurance covers in 2008.
From latest figures released, Piam said combined loss ratios for the motor insurance business in 2007 and 2008 stood at 114% and 115% respectively. It said insurers have also expressed their concerns over the rapidly increasing claims pay-outs especially for third party bodily injury claims. The claims ratio for third party bodily injury claims skyrocketed to 262% in 2007 and 288% in 2008, it added.
Industry sources estimate that the standalone motor 'Act' insurance, which is the portion compulsory for all motorists, has generated gross premiums of close to RM600 million last year, with Kurnia Insurans and P&O Insurance conducting close to half of the industry's total.
The motor 'Act' insurance policy provides protection against death and injury to third parties. The third party motor insurance also provides protection against other legal liabilities such as damage to the property of a third party (usually somebody else's car or motorcycle or a neighbour's gate) and certain specified legal costs.
Under the third party cover, a policyholder may opt to include protection for loss or damage to his own vehicle due to fire or theft only.
(This story appeared in The Malaysian Reserve on June 15, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Motor claims a major drag on profits of insurance firms
By Habhajan Singh
Claims for motor insurance were a major drag on the operating profits of general insurance and takaful operators last year, according to an analysis of statistics released by Bank Negara Malaysia (BNM).
For 2008, operating profit of the general insurance and takaful business, which declined by 44.5% to RM0.7 billion, was affected by a higher claims ratio of 84.2%, mainly from due to claims by motor vehicle.
Last year, the claims ratio stood at 79.6%, which meant that for every ringgit of premium collected by these insurers and takaful operators, close to 80 sen went to claims. And the situation is expected to worsen, going by the caution thrown in by the the central bank's Financial Stability and Payment Systems Report 2008 released in March.
The BNM report said claims are expected to intensify due to higher incidences of theft and fraud as well as less regular maintenance. This will certainly put more pressure on providers of motor insurance, many of whom are pulling the plug when it comes to providing third party motor coverage.
"Bodily injury makes about 90% of third party claim. It is increasing, making it very painful for insurers.
"To make matters worse, there are fears that fraud syndicates are reaping big, big money from fraudalent third party bodily injury claims," said Takaful Ikhlas Sdn Bhd president and chief executive officer Datuk Syed Moheeb Syed Kamarulzaman.
Major players in the motor insurance sector include Kurnia Insurance (M) Bhd, Allianz General Insurance Company (Malaysia) Bhd, AmG Insurance Bhd, Tokio Marine Insurans (M) Bhd, Pacific & Orient Insurance Co Bhd, Berjaya Sompo Insurance Bhd and Uni.Asia General Insurance Bhd.
The high claims ratio has seen insurers steering clear from underwriting third party liability coverage, the minumum insurance cover mandated by the Road Transport Act 1987. Besides providing insurance protection against death and injury to third parties (which is provided under the 'Act Only' motor insurance policy), third party motor insurance also provides protection against other legal liabilities such as damage to the property of a third party (usually somebody else's car or motorcycle or a neighbour's gate) and certain specified legal costs.
Under the third party cover, a policyholder may opt to include protection for loss or damage to his own vehicle due to fire or theft only.
"It is the Act claim that is rising, and rising fast," Syed Moheeb said.
For this year, the central bank report released three months ago noted that the Malaysian insurance and takaful sector will also be affected by the potential lower demand for protection and related products in a highly competitive industry.
"In particular, the expected decline in vehicle sales will negatively impact the motor insurance and takaful business which constituted 45% of gross insurance premiums in 2008. Premiums are also likely to be affected due to an increase in surrender rates and lower sums insured as a result of policyholders' efforts to reduce costs during these difficult periods.
"In addition, claims are expected to intensify due to higher incidences of theft and fraud as well as less regular maintenance," the report said.
In the report, the central bank also noted that the insurance and takaful sector, while maintaining a comfortable solvency position, faced challenges in maintaining the growth in premiums and contributions from new businesses, compounded by intense competition in the industry. It said total net premium and contribution income grew by 2.4%, mainly attributed to the expansion in takaful business.
It also noted that demand for general insurance and takaful coverage on motor and marine, aviation and transportation related businesses moderated in tandem with the slower trade activities and a more subdued automotive demand outlook.
It said the gross direct premium and contribution for the general insurance and takaful business registered an increase of 5.5% to RM11.5 billion, driven mainly by the expansion in the fire segment.
(This story appeared in The Malaysian Reserve on June 15, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Claims for motor insurance were a major drag on the operating profits of general insurance and takaful operators last year, according to an analysis of statistics released by Bank Negara Malaysia (BNM).
For 2008, operating profit of the general insurance and takaful business, which declined by 44.5% to RM0.7 billion, was affected by a higher claims ratio of 84.2%, mainly from due to claims by motor vehicle.
Last year, the claims ratio stood at 79.6%, which meant that for every ringgit of premium collected by these insurers and takaful operators, close to 80 sen went to claims. And the situation is expected to worsen, going by the caution thrown in by the the central bank's Financial Stability and Payment Systems Report 2008 released in March.
The BNM report said claims are expected to intensify due to higher incidences of theft and fraud as well as less regular maintenance. This will certainly put more pressure on providers of motor insurance, many of whom are pulling the plug when it comes to providing third party motor coverage.
"Bodily injury makes about 90% of third party claim. It is increasing, making it very painful for insurers.
"To make matters worse, there are fears that fraud syndicates are reaping big, big money from fraudalent third party bodily injury claims," said Takaful Ikhlas Sdn Bhd president and chief executive officer Datuk Syed Moheeb Syed Kamarulzaman.
Major players in the motor insurance sector include Kurnia Insurance (M) Bhd, Allianz General Insurance Company (Malaysia) Bhd, AmG Insurance Bhd, Tokio Marine Insurans (M) Bhd, Pacific & Orient Insurance Co Bhd, Berjaya Sompo Insurance Bhd and Uni.Asia General Insurance Bhd.
The high claims ratio has seen insurers steering clear from underwriting third party liability coverage, the minumum insurance cover mandated by the Road Transport Act 1987. Besides providing insurance protection against death and injury to third parties (which is provided under the 'Act Only' motor insurance policy), third party motor insurance also provides protection against other legal liabilities such as damage to the property of a third party (usually somebody else's car or motorcycle or a neighbour's gate) and certain specified legal costs.
Under the third party cover, a policyholder may opt to include protection for loss or damage to his own vehicle due to fire or theft only.
"It is the Act claim that is rising, and rising fast," Syed Moheeb said.
For this year, the central bank report released three months ago noted that the Malaysian insurance and takaful sector will also be affected by the potential lower demand for protection and related products in a highly competitive industry.
"In particular, the expected decline in vehicle sales will negatively impact the motor insurance and takaful business which constituted 45% of gross insurance premiums in 2008. Premiums are also likely to be affected due to an increase in surrender rates and lower sums insured as a result of policyholders' efforts to reduce costs during these difficult periods.
"In addition, claims are expected to intensify due to higher incidences of theft and fraud as well as less regular maintenance," the report said.
In the report, the central bank also noted that the insurance and takaful sector, while maintaining a comfortable solvency position, faced challenges in maintaining the growth in premiums and contributions from new businesses, compounded by intense competition in the industry. It said total net premium and contribution income grew by 2.4%, mainly attributed to the expansion in takaful business.
It also noted that demand for general insurance and takaful coverage on motor and marine, aviation and transportation related businesses moderated in tandem with the slower trade activities and a more subdued automotive demand outlook.
It said the gross direct premium and contribution for the general insurance and takaful business registered an increase of 5.5% to RM11.5 billion, driven mainly by the expansion in the fire segment.
(This story appeared in The Malaysian Reserve on June 15, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Takaful Malaysia sees light at the end of tunnel
By Alfean Hardy
Syarikat Takaful Malaysia Bhd is seeing the light at the end of the global economic crisis tunnel and is planning to leverage on the improving e conomy and increasing customer appetite for investment products, its group managing director Datuk Mohamed Hassan Md Kamil said in a recent email interview with The Malaysian Reserve.
"We are of the view that the global economy will slowly stabilise towards the end of this year considering the massive stimulus packages and accommodative monetary policies introduced worldwide to support the downturn," he said. "Since equity markets normally recover a few months ahead of the economy, we expect the local market to steadily recover in the second half of this year.
"Hence, it is timely to offer an investment-linked product with equity exposure to take advantage of the upside when market recovers.
"We believe that investors are constantly looking for the best investible asset to invest in and Takaful myInvest provides them more alternatives to diversify their portfolios while at the same time obtain takaful protection," he added.
Takaful Malaysia recently launched an open-ended investment-linked product, Takaful myInvest, to cater to investors who want takaful protection while looking for alternatives to diversify their portfolios.
The product offers takaful protection in the event of death or total permanent disability during the investment period. It has four different investment funds — Dividend Fund (Irad), Blue Chips Fund (Istifad), Index Tracker Fund (Ihfaz) and Growth Fund (Ittihad) — that can be mixed to suit different investment appetites.
The funds will be invested in Bursa Malaysia-listed Shariah-compliant stocks approved by the Securities Commission's Shariah Advisory Council. The product is also designed to be invested in Islamic deposits and the money market.
Mohamed Hassan said Takaful myInvest is for all types of investors who hold an optimistic view on the equity market's recovery locally and would like to position their investment portfolios to take advantage of that recovery as well as the unlimited upside of potential returns that equity investments offer.
"While we are aware of the opportunities offered in the overseas markets as a result of the financial meltdown, we opine that the risks are also higher, which we need to avoid.
"The local market is more defensive in nature but it also offers tremendous growth," he said. "With the current economic condition, domestic investments would be the most prudent and best way to contain risk exposure.
"The domestic equity market still offers decent earnings in terms of dividend as compared to other regional markets, and money market investment ensures that liquidity is intact while at the same time offering the opportunity of stable returns," he added.
Asked whether Takaful Malaysia had an overseas variant of Takaful myInvest in the pipeline, Mohamed Hassan said the company was constantly working to offer innovative products to its valued customers.
"As such, there are plans on launching more investmentlinked products that will be associated with the performance of foreign investments, for example, structured products, provided that the global sentiment improves and that economic recovery is forthcoming," he said.
(This story appeared in The Malaysian Reserve on June 10, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Malaysian Re’s IFS rating affirmed by Fitch
Malaysian Reinsurance Bhd (Malaysian Re) has had its A — insurer financial strength (IFS) rating — affirmed by Fitch Ratings with a stable outlook, incorporating the firm's dominant position in the local market, its healthy capital position and prudent management.
A unit of MNRB Holdings Bhd, Malaysian Re is the country's leading reinsurance company and is an underwriter of general reinsurance business. Fitch is a global rating agency that covers entities in 90 countries, including IFS ratings of about 2,000 insurance companies worldwide.
In a recent statement, Fitch Ratings said Malaysian Re, as the national reinsurer, is the largest player in the local maket and it believes that its dominance is likely to remain unchallenged, mainly due to the voluntary cession arrangements that exist in the local market, which provide a sustainable premium base.
"Under the existing voluntary cessions market agreement, all local general insurance companies are required to cede a portion of their business to Malaysian Re.
"Consequently, Malaysia is the core market for (the firm), constituting over 80% of its total business. The company also actively participates in various local industry initiatives, which has helped strengthen its relationships with domestic insurance companies," it added.
Fitch said it viewed Malaysian Re's capital position as healthy and of very good quality, which consists of ordinary equity and retained profits with no debt issuance.
It said a RM20 million capital injection from its MNRB parent in April 2009 had further boosted paid up capital to RM500 million from RM480 million previously.
"Additionally, at the holding company level, there is above RM500 million of surplus capital, which could be a source of support if required," it added.
However, Fitch warned that, due to Malaysian Re's limited business geographical diversification, it faces the challenge of maintaining its good operating performance under current market conditions as well as the potential risk that the existing voluntary cession agreements could be reduced due to market liberalisation.
"Against the backdrop of a challenging business environment with poor investment sentiments, Malaysian Re's net income for its financial year ended March 31, 2009, is estimated by the company to reach about RM40 million, compared to RM85.1 million for FY08," Fitch said. — by Alfean Hardy
(This story appeared in The Malaysian Reserve on June 10, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
A unit of MNRB Holdings Bhd, Malaysian Re is the country's leading reinsurance company and is an underwriter of general reinsurance business. Fitch is a global rating agency that covers entities in 90 countries, including IFS ratings of about 2,000 insurance companies worldwide.
In a recent statement, Fitch Ratings said Malaysian Re, as the national reinsurer, is the largest player in the local maket and it believes that its dominance is likely to remain unchallenged, mainly due to the voluntary cession arrangements that exist in the local market, which provide a sustainable premium base.
"Under the existing voluntary cessions market agreement, all local general insurance companies are required to cede a portion of their business to Malaysian Re.
"Consequently, Malaysia is the core market for (the firm), constituting over 80% of its total business. The company also actively participates in various local industry initiatives, which has helped strengthen its relationships with domestic insurance companies," it added.
Fitch said it viewed Malaysian Re's capital position as healthy and of very good quality, which consists of ordinary equity and retained profits with no debt issuance.
It said a RM20 million capital injection from its MNRB parent in April 2009 had further boosted paid up capital to RM500 million from RM480 million previously.
"Additionally, at the holding company level, there is above RM500 million of surplus capital, which could be a source of support if required," it added.
However, Fitch warned that, due to Malaysian Re's limited business geographical diversification, it faces the challenge of maintaining its good operating performance under current market conditions as well as the potential risk that the existing voluntary cession agreements could be reduced due to market liberalisation.
"Against the backdrop of a challenging business environment with poor investment sentiments, Malaysian Re's net income for its financial year ended March 31, 2009, is estimated by the company to reach about RM40 million, compared to RM85.1 million for FY08," Fitch said. — by Alfean Hardy
(This story appeared in The Malaysian Reserve on June 10, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
TM Asia Life targets RM40m premiums in 3 wks
TM ASIA Life Malaysia Bhd is confident of locking in RM40 million in premiums within three weeks of the launch of its short-term single premium capital protected investment-linked product, Asia Jade.
Asia Jade is strategically designed and offers a 3.75-year capital protection investment plan with 20% Head Start Coupon and potential Maturity Bonus of 10%, issued by HSBC Bank Malaysia Bhd. The product is available from June 8-30, 2009.
TM Asia Life deputy CEO Jun Tokura said that Asia Jade is a close-ended fund that offers life protection insurance and the opportunity to invest into three promising stocks in China.
"We are very optimistic about this fund as it is specially selected to capitalise on the strength of China's economy and the stimulus package offered by the China government targeting on infrastructure development. "With this, we have carefully chosen three promising stocks, which are China Mobile Ltd, China Railway Group Ltd and China National Offshore Oil Corp Ltd," he said.
Following the successful launch of Asia TriMax in October last year and due to popular demand from our customers, Tokura said TM Asia Life has chosen to tie up with HSBC Bank Malaysia again to introduce Asia Jade, its second investment plan. The company is confident that the new product will appeal to many investors as it offers life protection and potentially high capital growth within a short time frame.
"Based on the back testing results of China Mobile and China National Offshore Oil Corp from July 1, 2002 to April 7, 2009, investors can expect average returns of 29.33% at maturity", he added.
Asia Jade fund requires a minimum investment of RM10,000. Investors will be assured of 100% capital protected returns upon maturity, which will be in 2013.
The life insurance will offer financial protection of up to 125% of basic premium against death and TPD (Total and Permanent Disability). Potential investors as young as 19 years of age are eligible to invest in Asia Jade, while life assured can be as young as one month to 75 years old.
TM Asia Life also offers education, endowment, whole life, term, medical, investment linked and group insurance solutions, covering a range of over 20 products.
It is the first Japanese owned life insurance company in Malaysia following the acquisition of Asia General Holdings by Tokio Marine & Nichido Fire Insurance Co Ltd, a unit of Japan's largest insurer, Tokio Marine Holdings, Inc.
(This story appeared in The Malaysian Reserve on June 9, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Another local party keen on PacificMas’ insurance biz: FD
PacificMas Bhd has found another interested party to acquire its insurance business and an application has been made to Bank Negara Malaysia (BNM) to enter into negotiations, PacificMas non-independent director George Lee said.
“It’s pending approval,” he told reporters after the company’s AGM in Kuala Lumpur on June 10, 2009, reports The Edge Financial Daily.
He did not name the interested party, the report added.
THE REPORT GOES ON:
Lee expressed confidence that the impending round of negotiations would work out, as the interested party is believed to be prepared to pay PacificMas’ asking price — a price tag which is pegged at a premium of the insurance business’ net book value of RM123 million as at March 31, 2009.
“It’s a local party and they are prepared to pay. After having failed on two previous occasions (due to pricing), we would not want to go into discussions with this party if we don’t have a fairly good indication that they are at least prepared to pay the price that the board feels is a fair price,” Lee said.
Lee is also the executive vice-president and head of group investment banking of Oversea-Chinese Banking Corporation Ltd (OCBC).
“We have a certain price in mind as we think it’s a profitable business. Therefore, it should be sold at a certain premium to book value and we are looking at a certain valuation,” he added.
The previous interested parties included EON Capital Bhd, OSK Holdings Bhd and even T Ananda Krishnan’s company — Usaha Tegas Sdn Bhd.
On PacificMas’ plans for the cash from the sale, Lee said the board may look at alternative investments, principally in finance services. “Also, we will definitely look at growing our fund management and leasing businesses,” he said.
“After careful evaluation and if the conclusion is that we can’t find a viable alternative and the money is put in fixed deposit, then it’s better we return the money to the shareholders than to put money in the bank,” Lee added.
For the year ended Dec 31, 2008, its insurance business contributed 29% to the group’s profits while its leasing and fund management businesses contributed 34% and less than 1% respectively. In 2007, the fund management business contributed 15% to group profits.
“Immediately after we sell the insurance (business), group profitability will shrink. What we are looking at over time is for the fund management and leasing businesses to contribute incremental profit on an absolute basis,” Lee said.
He added there was potential for the businesses to develop as currently the group’s fund management segment managed RM1.7 billion while the biggest fund in the country managed close to RM30 billion. The leasing business has a 1.5% market share of the RM50 billion market.
Industry observers believe PacificMas’ plan to grow these businesses has potential given that the group would also be able to leverage on OCBC.
On speculation of OCBC injecting Great Eastern Life Malaysia (GELM) into PacificMas post-disposal, Lee said the exercise was proposed twice but had failed.
“Nothing came out of the discussions and there must be very valid reasons why such mergers could not be consummated and I believe after two unsuccessful attempts… but I can’t speculate,” he said.
As OCBC has a 63.5% stake in PacificMas following its takeover exercise early last year, BNM imposed a condition on OCBC that it could not own two insurance companies in Malaysia. PacificMas has until October this year to sell its insurance business.
Meanwhile, on the company’s performance this year, PacificMas chief executive officer Ng Hon Soon said: “We expect better profitability.”
He added the second quarter was expected to see the same performance as its first quarter ended March. For its 1QFY09, PacificMas registered a net profit increase of 200% year-on-year to RM8.4 million.
“It’s pending approval,” he told reporters after the company’s AGM in Kuala Lumpur on June 10, 2009, reports The Edge Financial Daily.
He did not name the interested party, the report added.
THE REPORT GOES ON:
Lee expressed confidence that the impending round of negotiations would work out, as the interested party is believed to be prepared to pay PacificMas’ asking price — a price tag which is pegged at a premium of the insurance business’ net book value of RM123 million as at March 31, 2009.
“It’s a local party and they are prepared to pay. After having failed on two previous occasions (due to pricing), we would not want to go into discussions with this party if we don’t have a fairly good indication that they are at least prepared to pay the price that the board feels is a fair price,” Lee said.
Lee is also the executive vice-president and head of group investment banking of Oversea-Chinese Banking Corporation Ltd (OCBC).
“We have a certain price in mind as we think it’s a profitable business. Therefore, it should be sold at a certain premium to book value and we are looking at a certain valuation,” he added.
The previous interested parties included EON Capital Bhd, OSK Holdings Bhd and even T Ananda Krishnan’s company — Usaha Tegas Sdn Bhd.
On PacificMas’ plans for the cash from the sale, Lee said the board may look at alternative investments, principally in finance services. “Also, we will definitely look at growing our fund management and leasing businesses,” he said.
“After careful evaluation and if the conclusion is that we can’t find a viable alternative and the money is put in fixed deposit, then it’s better we return the money to the shareholders than to put money in the bank,” Lee added.
For the year ended Dec 31, 2008, its insurance business contributed 29% to the group’s profits while its leasing and fund management businesses contributed 34% and less than 1% respectively. In 2007, the fund management business contributed 15% to group profits.
“Immediately after we sell the insurance (business), group profitability will shrink. What we are looking at over time is for the fund management and leasing businesses to contribute incremental profit on an absolute basis,” Lee said.
He added there was potential for the businesses to develop as currently the group’s fund management segment managed RM1.7 billion while the biggest fund in the country managed close to RM30 billion. The leasing business has a 1.5% market share of the RM50 billion market.
Industry observers believe PacificMas’ plan to grow these businesses has potential given that the group would also be able to leverage on OCBC.
On speculation of OCBC injecting Great Eastern Life Malaysia (GELM) into PacificMas post-disposal, Lee said the exercise was proposed twice but had failed.
“Nothing came out of the discussions and there must be very valid reasons why such mergers could not be consummated and I believe after two unsuccessful attempts… but I can’t speculate,” he said.
As OCBC has a 63.5% stake in PacificMas following its takeover exercise early last year, BNM imposed a condition on OCBC that it could not own two insurance companies in Malaysia. PacificMas has until October this year to sell its insurance business.
Meanwhile, on the company’s performance this year, PacificMas chief executive officer Ng Hon Soon said: “We expect better profitability.”
He added the second quarter was expected to see the same performance as its first quarter ended March. For its 1QFY09, PacificMas registered a net profit increase of 200% year-on-year to RM8.4 million.
Thursday, June 4, 2009
Piam welcomes proposal to limit liability claims
by Habhajan Singh
Persatuan Insurans Am Malaysia (Piam), the association for general insurers operating in Malaysia, welcomed a proposal to limit the liability shouldered by insurance companies for motor insurance claims.
It is timely that the proposal to limit liabilities on third party motor insurance covers be considered seriously in order to ensure the viability and availability of third party insurance protection for vehicle owners, Piam said in a statement released yesterday [May 4, 2009], affirming a position long held by the grouping.
This was in response to a statement by Minister in the Prime Minister's Department Datuk Seri Mohamed Nazri Abdul Aziz on Wednesday.
One newspaper quoted the minister as saying the ministry would look at amending the laws covering motor insurance to resolve the matter. The report said public transport operators have been crying foul as insurance companies no longer want to insure taxis and buses.
Nazri said this was because the insurance companies claimed that they were losing money by insuring commercial vehicles. Nazri, the report added, said that at present operators could sue the insurance company for millions. The amendment would limit the liability shouldered by the insurance companies.
"This way, the vehicle would be insured, the operator would be able to claim during any accident and the insurance company would also be protected," one newspaper quoted the minister.
On May 27, The Malaysian Reserve reported that insurance companies are no longer willing to provide third party motor insurance under their banner, and are instead sending their customers to a high-risk insurance pool run collectively by the industry under orders from the regulators.
The report also noted that a recent decision by two local insurers to completely stop providing third party cover to commercial vehicles is set to see a higher volume of premium going towards the high-risk insurance pool called the Malaysian Motor Insurance Pool (MMIP), which had already seen a big jump last year.
On June 1, The Malaysian Reserve reported that Pacific & Orient Insurance Co Bhd (P&O Insurance), one of the local top guns in motor insurance, was set to pull out completely from the third party motor insurance segment, following the trend of other insurance providers in Malaysia who have stayed clear of this sector due to the high claims ratio.
The general insurer, a subsidiary of listed Pacific & Orient Bhd (P&O), was second only to Kurnia Insurans (M) Bhd for underwriting third party motor insurance covers in 2008.
In its response, Piam said for most countries in Europe, US and even Asean (except for Singapore, Brunei and Malaysia), the law provides for limited liability for third party risks arising out of the use of motor vehicles.
"In Malaysia, provisions for limiting liability will involve amendments to the Road Transport Act, 1987 and consultations with the Insurance Regulator on suitable amendments to the motor insurance policies to cater for the changes in limits of liability under the policy contract," it said.
Earlier, Piam had announced combined loss ratios of 114% and 115% for motor insurance business in 2007 and 2008 respectively. It said insurers have also expressed their concerns over the rapidly increasing claims pay-outs especially for third party bodily injury claims. Claims ratios for third party bodily injury claims skyrocketed to 262% in 2007 and 288% in 2008, said Piam.
(This story appeared in The Malaysian Reserve on June 5, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
Firm eyes Johor to boost takaful business: Star
By ZAZALI MUSA
JOHOR BARU: Prudential BSN Takaful Bhd (PruBSN) sees Johor as its next big market for the takaful business outside the Klang Valley.
Its chief executive officer Mohammad Salihuddin Ahmad said, in view of the good prospect, the company had decided to open its Southern Region Business Centre in Taman Austin Perdana near here.
PruBSN provides a wide range of services and acts as a one-stop centre where customers can make enquiries and seek advice from regional agents at the centre.
The Johor Baru centre is the company’s second after its Shah Alam branch was opened recently to serve customers in the central region.
“Johor, with a 3.17 million population of which 66% is of working age, is a large market that the company cannot ignore,’’ he said at the centre’s opening recently.
Salihuddin said that development activities at Iskandar Malaysia also provided good business opportunities for the company.
He said, apart from targeting Johoreans, the company would look at Singaporeans, especially those living in Johor Baru, as customers.
He said the company would open five new branches this year at state capitals in the northern region, east coast states, Sabah and Sarawak.
“We want to strengthen our position in the takaful industry,’’ he said.
Salihuddin said there was enormous potential for the industry to grow as its market penetration was only 7.7% compared to 40% for conventional insurance products.
He said the company wanted to create awareness that the takaful system was for everyone and it had nothing to do with one’s faith
PruBSN was founded in 2006 and has 216,308 policyholders of whom 35% are non-Muslims, and 10,000 agents of whom 50% are non-Muslims.
(THE STAR, Thursday June 4, 2009)
MAA may conclude unit sale to AMG by fourth quarter
KUALA LUMPUR: MAA Holdings Bhd expects to conclude the sale of its general insurance business and 4.9% stake in MAA Takaful Bhd to AMG Insurance Bhd by the fourth quarter, said chief executive officer Muhamad Umar Swift.
The general insurance business was priced at RM274.8mil and the MAA Takaful stake at RM16.2mil, Bernama quoted him as saying.
Both parties had agreed to the terms and the next step was to secure the approval of Bank Negara and shareholders, he said after the group AGM yesterday.
MAA Holdings chairman Tunku Datuk Ya’acob Tunku Abdullah said the group was also looking to raise its capital to further grow business and would opt for a rights issue or issuing new notes.
“MAA has not raised capital in the last 20 years. In the past, we funded via medium-term notes, for which we will start repayment next year for five years.
“We are still deliberating on the ideal structure to raise capital,” he said, adding that it was also looking at disposing its non-core businesses.
Muhamad Umar said once the transaction with AMG Insurance was completed, the group would have a clearer picture on the best course of action to raise fund. “We are trying to move away from debt and towards equity funding,” he said.
On the group’s plan to expand its overseas operations, Muhamad Umar said it was business as usual and MAA Holdings was open to any beneficial tie-ups.
“We have invested a lot in these operations and are looking for strategic partners that can take us to the next capital level to expand,” he said.
Meanwhile, MAA Holdings has posted a net profit of RM24mil, or 7.88 sen per share, in the first quarter ended March 31, mainly on higher operating income recorded by the group’s shareholders ’ fund.
“The profit in shareholders’ fund was due to mainly reversal of fair value loss of RM25.3mil arising from an interest rate swap transaction resulted from improvement in the market condition of the US municipal bond,’’ it said.
Revenue during the period under review was RM485mil versus RM519mil a year ago.
(THE STAR, Saturday May 30, 2009)
The general insurance business was priced at RM274.8mil and the MAA Takaful stake at RM16.2mil, Bernama quoted him as saying.
Both parties had agreed to the terms and the next step was to secure the approval of Bank Negara and shareholders, he said after the group AGM yesterday.
MAA Holdings chairman Tunku Datuk Ya’acob Tunku Abdullah said the group was also looking to raise its capital to further grow business and would opt for a rights issue or issuing new notes.
“MAA has not raised capital in the last 20 years. In the past, we funded via medium-term notes, for which we will start repayment next year for five years.
“We are still deliberating on the ideal structure to raise capital,” he said, adding that it was also looking at disposing its non-core businesses.
Muhamad Umar said once the transaction with AMG Insurance was completed, the group would have a clearer picture on the best course of action to raise fund. “We are trying to move away from debt and towards equity funding,” he said.
On the group’s plan to expand its overseas operations, Muhamad Umar said it was business as usual and MAA Holdings was open to any beneficial tie-ups.
“We have invested a lot in these operations and are looking for strategic partners that can take us to the next capital level to expand,” he said.
Meanwhile, MAA Holdings has posted a net profit of RM24mil, or 7.88 sen per share, in the first quarter ended March 31, mainly on higher operating income recorded by the group’s shareholders ’ fund.
“The profit in shareholders’ fund was due to mainly reversal of fair value loss of RM25.3mil arising from an interest rate swap transaction resulted from improvement in the market condition of the US municipal bond,’’ it said.
Revenue during the period under review was RM485mil versus RM519mil a year ago.
(THE STAR, Saturday May 30, 2009)
MAA mulling options to improve capital structure
by Alfean Hardy
MAA Holdings Bhd, which is in the midst of hiving off its general insurance business, is mulling over various options up to and including a rights issue as it seeks to raise funds to improve its capital structure, its chief executive officer/group managing director, Muhamad Umar Swift said.
As of its fiscal year ended Dec 31, 2008, the insurance firm's cash and cash equivalents fell 7.79% to RM51.35 million. The company expects to complete a RM254.8 million sale of its general insurance to AMG Insurance Bhd by year-end.
The exercise also includes an additional RM16.2 million deal to sell a 4.9% stake in MAA Takaful Bhd to AMG. Speaking to reporters after MAA's AGM in Kuala Lumpur last Friday [May 29, 2009], Muhamad Umar said one of the options being looked at aside from the disposal of MAA's general insurance business was a rights issue.
"The sale recapitalises our business and the rights issue (can) allow us to address the cash flow needs of the group," he said. "While that process is ongoing, we will also be disposing of our non-core businesses and activities and freeing up that cash as well.
These are activities like Wira Guards and our stake in Mithril Bhd (it holds a 33% stake as of end FY08).
These are non-core activities. Our focus is protection," he added. Muhamad Umar said it was MAA's long term vision to be an un-geared holding company. "There might be overdraft lines but the main will be equity-funded with investmentable business, life insurance business, and our funds management and mutual funds business," he added.
MAA has subsidiaries and associate firms overseas.
Asked what the company was going to do with those companies, Muhamad Umar said at the end of the day, MAA was a Malaysia-centric business.
"We're a Malaysian brand serving Malaysians," he said. "We expect our Philippines operations to be profitable this year and we're seeing a lot of consolidation in that market.
And, while we like our assets in the Philippines, should someone like it more we'd be more than willing to sell it.
While there's been some discussions, with the current recession, this is probably not the best time to market this asset," he added.
Muhamad Umar said Indonesia was another matter. "It's a more interesting issue for us with 250 million people, a large market force and we've invested time and effort there. It's wait-and-see. It's a profitable asset for us now but, again, how much capital do we need to take it to the next level. We're looking for a strategic partner to help us take it to the next level," he said.
"For (Australian associate) Columbus Capital Australia, the asset was profitable this year and it has an interesting business model but is it a core asset for us? No, so we're looking to dispose of that asset as well," he added.
MAA executive chairman Tunku Datuk Ya'acob Tunku Abdullah said, while it was nice to play overseas, changing central bank capital requirements meant that the firm required money for its Malaysian businesses.
"If there's an offer, we will sell. I don't think there's any offer (at this moment).
For now the businesses run as is," he said. "We're not expanding those overseas operations. We're reserving all our money for our Malaysian operations. If there's a need to increase capital requirements (set by governments there), we will then look for strategic partners to put in the difference," he added.
Asked about the rights issue, Tunku Ya'acob said, for now, it was only an option for MAA as it seeks to raise capital. "We're still deliberating what would be the ideal structure to finance MAA's financial requirements. Other options include to issue new notes and discontinue rolling our RM200 million medium-term notes facility," he added.
(This story appeared in The Malaysian Reserve on June 1, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
MAA Holdings Bhd, which is in the midst of hiving off its general insurance business, is mulling over various options up to and including a rights issue as it seeks to raise funds to improve its capital structure, its chief executive officer/group managing director, Muhamad Umar Swift said.
As of its fiscal year ended Dec 31, 2008, the insurance firm's cash and cash equivalents fell 7.79% to RM51.35 million. The company expects to complete a RM254.8 million sale of its general insurance to AMG Insurance Bhd by year-end.
The exercise also includes an additional RM16.2 million deal to sell a 4.9% stake in MAA Takaful Bhd to AMG. Speaking to reporters after MAA's AGM in Kuala Lumpur last Friday [May 29, 2009], Muhamad Umar said one of the options being looked at aside from the disposal of MAA's general insurance business was a rights issue.
"The sale recapitalises our business and the rights issue (can) allow us to address the cash flow needs of the group," he said. "While that process is ongoing, we will also be disposing of our non-core businesses and activities and freeing up that cash as well.
These are activities like Wira Guards and our stake in Mithril Bhd (it holds a 33% stake as of end FY08).
These are non-core activities. Our focus is protection," he added. Muhamad Umar said it was MAA's long term vision to be an un-geared holding company. "There might be overdraft lines but the main will be equity-funded with investmentable business, life insurance business, and our funds management and mutual funds business," he added.
MAA has subsidiaries and associate firms overseas.
Asked what the company was going to do with those companies, Muhamad Umar said at the end of the day, MAA was a Malaysia-centric business.
"We're a Malaysian brand serving Malaysians," he said. "We expect our Philippines operations to be profitable this year and we're seeing a lot of consolidation in that market.
And, while we like our assets in the Philippines, should someone like it more we'd be more than willing to sell it.
While there's been some discussions, with the current recession, this is probably not the best time to market this asset," he added.
Muhamad Umar said Indonesia was another matter. "It's a more interesting issue for us with 250 million people, a large market force and we've invested time and effort there. It's wait-and-see. It's a profitable asset for us now but, again, how much capital do we need to take it to the next level. We're looking for a strategic partner to help us take it to the next level," he said.
"For (Australian associate) Columbus Capital Australia, the asset was profitable this year and it has an interesting business model but is it a core asset for us? No, so we're looking to dispose of that asset as well," he added.
MAA executive chairman Tunku Datuk Ya'acob Tunku Abdullah said, while it was nice to play overseas, changing central bank capital requirements meant that the firm required money for its Malaysian businesses.
"If there's an offer, we will sell. I don't think there's any offer (at this moment).
For now the businesses run as is," he said. "We're not expanding those overseas operations. We're reserving all our money for our Malaysian operations. If there's a need to increase capital requirements (set by governments there), we will then look for strategic partners to put in the difference," he added.
Asked about the rights issue, Tunku Ya'acob said, for now, it was only an option for MAA as it seeks to raise capital. "We're still deliberating what would be the ideal structure to finance MAA's financial requirements. Other options include to issue new notes and discontinue rolling our RM200 million medium-term notes facility," he added.
(This story appeared in The Malaysian Reserve on June 1, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)
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