LPI Plans to Achieve Bigger Market Share with a Reduced Profit Margin
As a result of high competition in the general insurance industry of Malaysia, LPI Capital Berhad has witnessed a sharp fall in the net profit by 3.4% amounting to RM65.74 million. The earnings per share have come down to 16.5 sen as compared to 17.09 sen in 2QFY17. LPI has declared a dividend of 26 sen per share that will be paid on 1 August 2018.
The decrease in net profit is seen in the second financial quarter (2QFY18) that ended on 30 June 2018 as compared to the net profit of RM68.06 million during the second quarter of 2017 (2QFY17). Also, the net profit for the first half of 2018 is reported to be RM138.24 million, which is lower as compared to RM138.63 million in the previous year.
LPI says that a stiff competition is expected to continue due to market liberalisation in the general insurance industry. It also states that the players are taking advantage of the liberalisation in order to build their market share. LPI is working towards establishing a bigger market share by hanging on to a lower profit margin.
10 July 2018
Zero Percent GST on Insurance and Takaful Products
The Malaysian Takaful Association, General Insurance Association of Malaysia, and Life Insurance Association of Malaysia have all come up with an announcement that spells good news for all those who pay life insurance and general insurance premiums.
Goods and services tax (GST) on takaful, life insurance, and general insurance policies will be zero percent from here on. The 0% GST policy will be effective from 1 June 2018. Previously, there was a GST of 6% being imposed on all insurance and takaful products.
The change in GST rates was made in compliance with the declaration made by the Ministry of Finance and Royal Malaysian Customs Department.
04 June 2018
BNM: Foreign Investors Must Divest From Domestic Insurance Companies
Bank Negara Malaysia (BNM) states that between 2008 and 2017, over RM16.5 billion in the form of dividends has been earned by foreign insurers. Also, during the period between 2014 and 2016, these foreign insurance companies have repatriated over RM1.3 billion in management fees and outsourcing arrangements. As a result, BNM has asked them to divest their shares in the insurance companies.
The foreign investment into insurance industry was accepted only to improve the domestic insurance companies. But, there is no significant improvement seen in the domestic companies as yet. Only a minimal improvement is seen in terms of market penetration as the width of the product range is not up to the expectations, especially for low-income earners.
BNM is ready to accept any initiatives from insurers to improve the Malaysian economy. BNM also says that the foreign companies were asked to make certain commitments to get the license. However, they have not stood on their commitments over the past years.
19 April 2018
Syarikat Takaful Malaysia is Expanding Digitally
Syarikat Takaful Malaysia Bhd (STMB) is targeting for a higher growth in the financial year 2018. The company is also focussing on expanding the digital platforms contributions into this growth swiftly. STMB is targeting 10% to 15% growth for the year 2018. The growth in the last financial year reached up to just 5.2%.
However, the online sales contribution has been on the higher side. From RM200,000 per month when it started 2 years back, the current contribution stands at RM2.2 million per month. Also, earning per share is forecasted to rise from 1% to 2% in the coming financial year. While the other income projections of the company stand between 19% and 21%.
The company is looking at an expansion of contribution from digital platform. One of the risks involved may be the deceleration in growth of family takaful contributions that will be caused by steep increase in operating costs and intensified competition.
16 April 2018
CIMB to Distribute Sompo’s Bancassurance Products
Recently, CIMB Group Holdings Berhad has entered into a bancassurance partnership with Sompo Holdings (Asia) Pvt Ltd. As a part of the partnership, CIMB will play an important role in distributing Sompo’s non-life insurance products in Malaysia.
As per Sompo’s Malaysian establishment, Berjaya Sompo Insurance Berhad (BSIB), CIMB will distribute the non-life insurance products to its individual and corporate customers through its various modes such as online platform, call centres, and branch offices. For the retail sector, CIMB will distribute insurance products for motor, travel, home, and personal items, whereas for corporate customers, a cover is provided on group benefits, engineering, liability, property, and marine credit.
Both the parties’ digital advancement has given rise to an app-enabled travel insurance available on CIMB’s chat-banking app, Enhanced Virtual Assistant (EVA). Retail customers of Malaysia can now buy travel insurance online.
In addition to Malaysia, CIMB also distributes Sompo’s products in Singapore, Indonesia, and Thailand.
16 April 2018
CIMB Puts Forth Its Targets For The Year 2018
CIMB Group has announced its goal of reaching RM200 million non-life insurance premiums this year. An insight here is that CIMB has entered into a 15-year partnership with Sompo Holdings Asia Pvt Ltd in order to market Sompo’s non-life insurance products. CIMB has been selling the non-life insurance policies in Singapore and Indonesia for the past 2 years. In Malaysia, the policy distribution began in August 2017.
The local entity of Sompo Holdings is called Berjaya Sompo Insurance Berhad. They provide fire insurance, mortgage-related insurance, motor insurance, fire insurance, snatch theft policies, etc.
Speaking about the response rate in Malaysia, Samir Gupta, CEO of Group Consumer Banking said that they have collected RM22 million in the last quarter of 2017. He also shared that they have achieved 20% of the year’s target in the first 2 months of 2018.
CIMB believes that the partnership takes the bank’s value to a new proposition and benefits the bank’s customers across south-east Asia.
15 April 2018
BNM’s Policies and Their Contribution to Insurance Industry
Recently, Bank Negara Malaysia (BNM) had brought about some new policies in order to take the insurance and takaful industry to new heights. Some of these new policies include the introduction of Perlindungan Tenang, the implementation of Balanced Scorecard, using direct distribution channel for sales, the implementation of a free-pricing mechanism for general products among the others.
A research wing of MIDF Amanah Investment Bank Berhad, MIDF Research, has stated that the BNM’s measures have played a crucial role in developing the industry. The research institute points that the life insurance and the family takaful witnessed a growth of 5.8% year-on-year (y-o-y) in terms of new premium and policies, in the year 2017.
Further, the study says that the life insurance and family takaful products contributed about 64.8% of the total new premiums bought in the year 2017. The overall penetration rate of these products is at 36.5% and has increased by 2 percent as compared to the previous year. Therefore, these products are expected to have the same popularity with increased sales in 2018 as well. The recovery of oil and gas sector is also expected to add a positive momentum to the general insurance sector.
15 April 2018
Agents and Technology Come Together To Build Insurance Sector
With the advent of technology, a major part of our lives has become simple and easy. The technology advancement has also given a golden touch to the banking and insurance sectors. It has led to performing most financial operations from the comfort of your house with the help of internet. The insurance industry is not devoid of this facility. You can purchase or renew your insurance policy via your personal computer.
Since online platforms are performing the tasks of insurance agents, the consumer can now directly deal with the insurer. The agent’s commission now takes the form of discount for the consumer.
Speaking about the importance of owning an insurance policy, Ann Choo, an insurance agent of AIG Malaysia says that the public is welcoming the practice of purchasing insurance policies in recent times. One of the reasons for this trend is that the insurance companies have been redesigning their policies to cater the needs of individuals as much as possible. Choo says that though people are educated they still need the guidance of the agents.
Therefore, agents like Choo believe that they can co-exist with the dynamic advancements in technology and strive to build the insurance industry to greater heights.
13 April 2018
Foreign Insurers Wants BNM to Review its Local Ownership Rule
Following an intervention from the US government, American International Group (AIG) and AIA, the two big insurers are reportedly reluctant to comply with the central bank’s order on local ownership. However, the opposition to the proposal came up during bilateral talks that took place between Kuala Lumpur and Washington recently.
Earlier in 2003, the AIG group managed to receive an exclusion from former Prime Minister, Mahathir Mohamad, prior to stepping down from the post. The Malaysian government officials now claim that both AIA and AIG are maintaining that the exclusion granted should remain unchanged.
In April 2017, Bank Negara laid down certain deadlines that urged foreign insurance companies to give away at least 30% interest in their operations to the local investors.
Meanwhile, the officials from the foreign insurers did not want to discuss their divestment plans though companies like Prudential, Great Eastern, as well as Tokio Marine, were said to be searching for their local partners actively.
While Great Eastern has already identified Employees Provident Fund as its local partner and is currently negotiating to close the deal as soon as possible, Prudential Assurance Malaysia is currently in talks with Kumpulan Wang Persaraan. If all goes well, then the two parties would crack a deal before April end.
26 March 2018
Bank Negara Malaysia Plans Revise Takaful Framework for Clarity
The Central Bank of Malaysia is all set to reinforce the country’s takaful industry to foster innovation and bring in more clarity on how to use several Shariah standards.
Governor Tan Sri Muhammad Ibrahim confirmed that the revised framework would be made open to the public and the industry within mid-2018 so that they can provide their feedback.
He further added that the government has plans to strengthen the power of takaful operators to protect the interest of takaful participants.
On the issue of 25% family takaful penetration by the year 2020, Muhammad commented that though it is an ambitious project, it is achievable, and he is hopeful that by 2020, they can make 16% progress.
On the other hand, the fact that takaful is yet to realise its full potential as it has not migrated to e-payments is a cause for concern, according to Muhammad Ibrahim. He revealed that Bank Negara was very close to finalising all the changes to the regulatory framework that would eventually allow online product aggregators to operate with access to the takaful market by the end of 2018.
He was saddened by the fact that takaful operators were dwarfed by the conventional operators and if they do not shape up yet, they will soon become non-existent.
26 March 2018
BMW X2 Targets ‘Cool Rebels’
BMW Malaysia is all set to introduce BMW X2 in Malaysia. CEO and managing director, Harald Hoelz said that the company wants to bring fresh life to the existing BW X series with the all new BMW X2. The first-ever Premium Sports Activity Coupe has been designed for the ‘Cool Rebels’ who wants to challenge the societal norms, he further added.
BMW X2 was available for pre-booking till March 20. Successful applicants who pre-booked BMW X2 online and raised funding for it through BMW Financial Services will get an opportunity to win an exciting trip to Southern Hemisphere Proving Grounds. Also, the lucky winner of the programme will be awarded with Assurance Shield Programme - a life insurance product.
Apart from this, winners will also get to enjoy a helicopter ride, ice diving, drag racing, and more.
21 March 2018
Bank Negara Asks Foreign Investors To Stay True To Their Commitments
Bank Negara Malaysia asked foreign insurers to commit more to their local units by rationalising their stakes. The bank stated that this was not a new rule that’s going to be imposed on foreign insurers.
According to reports, the statement is based on certain commitments which the foreign insurers had pledged while stepping their feet in the insurance sector. This statement from the central bank comes right after the news of Prudential Malaysia to sell 30% of stake to KWAP broke out.
Foreign insurers are required to cut their stakes in order to initiate local participation in the insurance sector. However, as per reports, the percentage of share that’s supposed to be sold depends on foreign insurers’ commitment to Bank Negara Malaysia during the time of their entry to the market.
There are rumours floating around that the foreign insurers have to sell at least 30% of their stake. Industry analysts are also expecting to see more of acquisitions and mergers as a bid to sell stakes.
12 March 2018
Prudential’s Malaysia Unit In Talks With KWAP For 30% Stake Sale
According to reports, Prudential PLC’s Malaysian unit is in talks with Kumpulan Wang Persaraan (KWAP) to sell a 30% stake valued at US$435 million. Though the deal is not exclusive and yet to be confirmed, reports suggest that the deal could be finalised any time soon.
Last year, a directive was issued by Malaysia’s Central Bank that asked foreign insurers to downsize their stakes in local units by 30%. Following this development, several foreign insurers, including Prudential, Zurich Insurance Group, and Tokio Marine Holdings are in a rush to downsize their stakes. The Malaysian units are expected to submit their plan before June.
Wan Kamaruzaman Wan Ahmad, the CEO of KWAP said the Malaysian pension fund has submitted an offer in response to Prudential’s 30% stake claim. However, he didn’t disclose the details concerning the deal. On the other hand, Prudential refused to comment on the discussion, but said that they are committed to its local business.
The new rule initiated by the Central Bank has invoked a sense of concern among foreign insurers. According to reports, other than Prudential, many foreign insurers in Malaysia are in a rush to reduce their stakes.
Prudential’s Malaysian unit is estimated at a value of about RM5.5 billion.
7 March 2018
Takaful Malaysia Ventures Into Digital Insurance Market
Syarikat Takaful Malaysia Bhd (Takaful Malaysia) ventured into the digital insurance sector with its online portal - “Click for Cover”. According to reports, the Malaysia-based takaful company with its new digital launch, expects a 20% to 25% boost in its online sales.
Datuk Seri Mohamed Hassan Kamil, the group’s chief executive officer (CEO) said that the portal will allow customers to buy insurance products conveniently. E-payment facility coupled with new products, including term life insurance and critical illness insurance, will contribute to sales growth, he further said. Click to Cover has been designed to attract millennials to buy insurance products.
However, the company’s agency force will continue to flourish as there are certain products which might require advisory services, he added.
Setting its foot in the digital insurance market, the company also signed a partnership with Fusionex International and ReMark International – a data technology service provider and digital insurance marketing agency respectively.
7 March 2018
RAM Expects Mixed Growth for the Malaysian Insurance Industry
RAM Ratings, Malaysia’s premier ratings agency, has projected a flat growth pattern in 2018 for general insurance premiums and takaful contributions in the country. The agency said that much of this is because of increased competition, inconsistent consumer behaviour, and liberalised tariffs.
The combined life insurance and family takaful segments were expected to grow well as consumers are more aware and welcoming to the idea. But, RAM did add that the takaful segment will outgrow the conventional insurance sector owing to increased awareness and education among Muslims who make up the majority of the population.
With the economy growing at a stable rate and multiple reforms being implemented throughout the insurance sector, RAM expects insurers to develop gradually and be more sustainable in the long run. However, the new reform measures could hold the entire industry back in the short term in terms of profitability.
In spite of the insurance sector’s underwhelming growth, the general insurance and takaful segments in particular are expected to perform consistently if there are no natural calamities or catastrophes.
With the Overnight Policy Rate (OPR) being increased recently, life insurers and takaful operators can now make the most of a hike in interest rates. But, such relief, if any, will depend on the company’s investments, contractual obligations, and asset-liability management.
7 March 2018
Insurance Industry and the Path of Growth
The Malaysian government has been lately concentrating on the various ways to popularise the benefits of having insurance coverage in all possible fields such as medical, educational, property, etc.
Datuk Seri Johari Abdul Ghani, Finance Minister of Malaysia said that the need of the hour is to focus on strengthening the distribution channels for insurance products. Also, he said that they are looking for ways to make the insurance products more affordable to citizens with average income.
While many developed countries have made insurance a mandatory necessity, Malaysia hasn’t reached that mark yet. The minister expressed that if the insurance products are made more affordable, it will lead to full coverage for everybody.
Since the healthcare cost has been increasing every year, it is expected that the demand for health insurance will drastically increase soon. Also, there are plans to digitise the insurance industry. This may lead to a rise in the industry in terms of penetration and volume. As part of the growth, Takaful Malaysia has launched ‘Click for Cover’ online portal where you can purchase the motor, personal accident and medical coverage. They are planning to launch more products on the portal in the near future.
7 March 2018
KWAP to Acquire Stakes of Foreign-Owned Insurance Firms
Kumpulan Wang Persaraan (KWAP), Malaysia's second-largest pension fund is all set to close a deal with a foreign insurance company to acquire its stakes, provided the interest rates are decreased. Ideally, the shareholders/insurers are expected to reduce 30% of the total interest by end of June this year.
Datuk Wan Kamaruzaman Wan Ahmad, CEO of KWAP confirmed that they are in the discussion phase with two insurers but most likely they will end up the deal with one of them very soon. He further said that the idea is to expand investments into the insurance division.
The Retirement Fund or KWAP is said to be looking forward to Singapore-based Great Eastern Holdings and Prudential Assurance Malaysia Berhad for their stake acquisitions.
7 March 2018
Axiata To Invest RM200 Million In Digital Financial Services Industry
Telecommunications giant, Axiata Group Bhd, is looking for potential acquisitions in the digital financial services sector. The sector includes advertising technology, financial technology, and Internet-of-Thing companies where Axiata wants to strengthen its base. The group is reportedly investing RM200 million for planned expansion in this particular sector.
Tan Sri Jamaludin Ibrahim, the president and group chief executive officer (CEO) told the media that about two-thirds of the total sum will be used to strengthen the organisation’s operations in the country. The rest of the amount will be utilised to build up its base in Sri Lanka and Indonesia.
Speaking to the media, he said that Axiata’s prime focus remains on BOOST, an e-wallet developed by the company. According to reports, BOOST has already set a target to acquire 100,000 merchants by the end of this year.
Jamaludin also said that the company would gradually offer micro services catering to the financial services sector – remittance, savings, lending, payments, and insurance.
1 March 2018
Foreign Insurers in Malaysia: The Reality of the Situation
For a long time, Malaysia has been regarded as one of the most attractive markets for insurers in Asia. But, in a major hit to foreign insurers, Malaysian regulators have decided that overseas insurance companies need to sell at least a 30% stake to locally based insurers or as local IPOs by the end of June if they wish to comply with the latest foreign ownership regulations.
For firms like AIA Group Ltd, Prudential Plc, Tokio Marine Holdings Inc, and Great Eastern Holdings Ltd, giving up a sizeable chunk of the domestic business can mean a major hit financially. Additionally, the local buyer pool is restricted to financial behemoths backed by the state, including Permodalan Nasional Bhd, Kumpulan Wang Persaraan (Diperbadankan), Khazanah Nasional Bhd, and Employees Provident Fund.
While IPOs may be more encouraging, there’s no way for a foreign insurer to work successfully without partnering with a state-owned entity. Ultimately, if this rule is enforced strictly, foreign insurers could end up losing one of the more profitable Asian markets that has very few operational restrictions.
22 February 2018
MFRS 9 to Usher Several Provisioning Methods
According to the annual report of Perbadanan Insurans Deposit Malaysia (PIDM), the Malaysian Financial Reporting Standards 9 (MFRS 9), is expected to bring in multiple provisioning methods.
Furthermore, the report also confirmed that the MFRS 9 would be responsible for the pricing of financial products, along with financial assets growth that aim to safeguard asset quality.
This reporting standard is believed to have an influence on both banking and insurance industries. It replaced the existing MFRS 139, and brought about changes in financial assets (their classification and measurement) besides accounting for several changes in the credit risk in the areas of financial liabilities, hedge accounting, as well as impairment.
Yet another regulatory growth is the implementation of the Basel III Net Stable Funding Ratio (NSFR). The central bank of Malaysia confirmed that the implementation date of NSFR would be 2 January 2019. Meanwhile, the MFRS 9 was implemented on 1 January this year.
24 April 2018
IAG Has Decided to Sell Four Southeast Asian Businesses
According to sources, Insurance Australia Group (IAG), the Australian Securities Exchange-listed multinational insurer has decided to sell all four of its Southeast Asian businesses as they posed as a challenge for IAG. The insurer has reportedly incurred a loss of A$6 million ($4.63 million) in Asia in the first fiscal half of this year.
The Sydney-based general insurer has ventures in Thailand, Malaysia, Vietnam as well as Indonesia. Collectively, they are worth $500 million. It also has operations in the Indian subcontinent and owns about 16.9% stake in China’s Bohai Property Insurance Company Ltd.
Meanwhile, according to the opinion of a spokesperson for IAG, the insurer has plans to review the Asia strategy, and not to exit the region completely.
The Malaysian venture could be picked up by other insurers operating in Malaysia such as Maybank, Etiqa or Tokio Marine. This exit by IAG could free up to $621 million of capital within a few years.
24 April 2018
KWAP Strikes A Deal To Co-Own An Insurance Company
The Retirement Fund Inc (KWAP) plans on buying a stake in insurance companies owned by foreign investors. Datuk Wan Kamaruzaman Wan Ahmad, CEO, KWAP says that the deal is about to complete and the partner is looking to submit the proposal to Bank Negara Malaysia (BNM).
Though KWAP has not revealed the name of the partnering insurance company, the company did mention that the initiative is in response to the latest policy passed by BNM. The policy says that the foreign investors’ stake must not be greater than 70%. BNM has stated that the foreign insurers such as AIA Berhad, Great Eastern Life Assurance Berhad, and Prudential Assurance Malaysia Berhad must sell 30% of their stakes to local shareholders by the end of June 2018.
KWAP has also come forward to buy a stake in Prudential that is worth RM1.2 billion-RM1.5 billion.
26 April 2018
Ensuring a Comprehensive Approach to Financial Planning
Phang Kar Yew, the executive director of Harveston Financial Group, a wealth management company, has said that there’s an immediate need for financial planning solutions in Malaysia. With most wealth management professionals looking at this sector as nothing more than investments, most Malaysians end up being unaware of how to manage their assets efficiently.
Such misinterpretations can directly lead to financial issues like unclaimed assets. Over the last year, the Registrar of Unclaimed Money announced that RM6 billion was left unclaimed. Even mature life insurance policies were left unclaimed because of a lack of proper financial planning.
Mr. Phang Kar Yew also added that most high-net-worth Malaysians run diversified businesses. With a proper approach to financial planning and wealth management, these individuals will be able to comply with all financial rules set in place while still being tax-efficient.
To do its bit in resolving this issue, Harveston Financial Group will organise a wealth management conference that focuses on pre-retirement and post-retirement financial planning. The conference will also focus on other aspects of wealth management, including insurance, health care, business succession planning, estate planning, and investment strategies.
23 May 2018
Takaful Malaysia thinks Etiqa’s entry will boost Shariah-compliant market
According to insurance giant Syarikat Takaful Malaysia Bhd, the prospect of Etiqa, Maybank’s insurance outlet, entering the local stock exchange market will help in increasing the liquidity of Shariah compliant products in the Malaysian market.
Talking about the development, Datuk Seri Mohamed Hassan Md Kamil, CEO of the group said, “Etiqa being listed on the local stock market will create more opportunities for the investors and the market will also get Shariah-compliant insurance stocks. The entry of another public-listed Islamic company in the exchange market will help in boosting the liquidity.” He further stated that the move is helpful for Takaful Malaysia too as it will bring in more trading activities in the market.
With capitalisation of more than RM3 billion, Takaful Malaysia currently is the biggest listed insurance firm on Bursa Malaysia.
27 May 2018
Analysts Prediction: Takaful Overpowers The Conventional Insurance
Analysts are creating a positive hope about Syarikat Takaful Malaysia Berhad. The growth trend of the group’s industry premium is soon going to outnumber the conventional insurance, as per the report. The research wing of Kenanga Investment Bank, Kenanga Research, has made the statement regarding the growth of Takaful Malaysia based on the factors of low penetration and a never-ending demand for Takaful products.
Kenanga Research shares that the group will remain focused on adding more value to the segments—customer reach, cost competitiveness, operational agility, and maximising value to the shareholders. Working towards these objectives, the group has been using various marketing strategies, promotional offers, and rebates on its products to attract the right customers. The research arm predicts that the delivery of return on equity in the financial year 2018-2019 would be the highest in the industry.
MIDF Research, the research arm of MIDF Amanah Investment Bank Berhad says that the group’s long-term strategy will help expand its influence on Takaful Malaysia in terms of the digital market. The group has launched new products in the digital platform recently. The research wing expects these new products to be effective enough in driving growth in the market. The products are expected to play a major role in offering better performance metrics such as reduced turnaround time.
28 May 2018