MNRB's Regional Plan

MNRB's main focus in the next few years will be overseas especially in takaful and reinsurance businesses:

• Takaful Ikhlas is eyeing the Egyptian (population: 70 mil, penetration rate: 1%) and Indonesian takaful markets
• Takaful venture in Egypt will be with selected partners
• Not ruling out strategic partner for Takaful Ikhlas in Malaysia
• Indonesia has no proper legislation on Islamic Insurance, potential will be tremendous once legislation framework is in place
• Reinsurance business made some inroads to Japan, the Middle East, North Africa and Eastern European countries
• Retakaful will focus in Malaysia, the world's largest takaful player

Source: The Star

What Will AIG Sell?

To repay the US$85 bil government loan quickly, what will AIG sell?

There is no final decision yet but apparently the international life insurance unit and the US pension businessess will not go.

Source: The Star

December Born Drivers Higher Risks

A study in UK has concluded that the month in which people are born can have impact on their performance as drivers.

People who were born in December have the highest likelihood to submit a motor insurance claims.

While there is no plan as yet to charge motor insurance premium by the day and month one was born in, there is no guarantee that this will not be done in future.

Source: Insurance Daily

Greenberg Plans to Sell AIG Stock

Maurice "Hank" Greenberg said he plans to sell shares of AIG for "liquidity and other purposes". He will sell the stock in the open market.

Greenberg owns 10% of AIG and he plans to "decrease his holdings materially".

It is estimated that Greenberg's AIG shares have lost US$2.4 bil in value since October last year.

Source: The Star

Independent Parties for Lehman Products Investors

Monetary Authority of Singapore (MAS) has instructed DBS and HSBC to appoint independent parties to oversee and investigate complaints from investors who purchased structured products linked to Lehman Brothers.

The move by MAS is not equivalent to ordering financial institutions to pay compensation. It is meant to assure investors that their complaints will be heard, documented and reviewed fairly and swiftly.

Source: Business Times

NCD Status Available through SMS

Insurance Services Malaysia Bhd (ISM) has come up with ISM-NCD System that allows consumers to check their No Claim Discount status through SMS. All insurance and takaful companies except 2 have signed up for the system, covering 99% of all motor insurance and motor takaful policies in Malaysia. The remaining 2 companies are expected to sign up for the system in the next few months.

Source: Business Times

Etiqa Signed Up NUBE

Etiqa is offering its Group Hospitalisation and Surgical (GHS) Takaful plan to National Union of Bank Employees (NUBE).

Out of 28,000 members of NUBE, 20,000 members are targeted to sign up the scheme within the next 3 months, paying RM300 each, bringing in total contribution of RM6 mil.

On other news, Etiqa assured that they have no direct investment in US. Etiqa Takaful was also in talks with several parties in the Middle East to build its distribution channels there.

Source: Business Times, The Star

DBS and HSBC to Update Investors

The structured products sold in Singapore that invested in Lehman mini bonds were sold by both DBS and HSBC. Both banks have been asked by Monetary Authority of Singapore to update their investors on a timely basis.

Source: Business Times

Pacific Insurance will still be Sold

Pacific Insurance is still available for sale even though the negotiation with OSK has ceased. The negotiation was called off because of the disagreement in pricing.

PacificMas has until October 2009 to sell off Pacific Insurance. Currently both local and foreign companies have expressed interest in acquiring Pacific Insurance. Not all are from insurance industry but all have exposure to the financial sector.

Source: The Edge Daily

Further Assurance from AIA

AIA's CEO in Malaysia has given further assurance on meeting commitments to policyholders and other financial obligations. The company is well-capitalised and has a substantial solvency margin surplus.

Other notable facts:

• 60% increase in recruitment of agents in 1st 9 months of the year
• New business premium growth in 1st 6 months: 17% compared with industry 4.5%

Source: The Star

Munich Re Wants to Increase Rates

I need the assistance of our readers to help me in understanding this.

Munich Re "sees opportunities to push through double-digit price increases following the rescue of American International Group (AIG) by the US government".

I do not know whether this applies to a specific class of reinsurance, and if so, which one.

For most other reinsurance classes such as Mortality, Critical Illnesses, Disability, Fire, Marine, Personal Accident, I do not see the justification of increase in reinsurance rates following the rescue of AIG by the US government.

Perhaps our readers who work in reinsurance company can help to explain?

How Safe is Your Investment in Structured Products

There are quite a number of structured products out there now sold by financial institutions including banks, insurance companies and takaful operators. Investors should know that most of these products are capital-protected, which is not the same as capital guaranteed.

The capital protection is linked to the credit of the underlying investments. With the latest Lehman event, investors in Hong Kong and Singapore who purchased Lehman-linked minibonds may stand to lose most or all of their original investment.

So make sure you fully understand the risks before purchasing such capital-protected structured products.

Read more:

Asian retail investors cry foul

Tan Kin Lian's Blog

AIA's Takaful Licence is in International Currency Business

It is confirmed that AIA obtained the international takaful licence, not takaful licence to operate Ringgit business as claimed by the Edge Weekly.

Under the licence, AIA Takaful International Bhd is allowed to offer family and general takaful and retakaful policies in international currencies.

Source: Business Times

Namlifa and MFPC Give their Assurance

Both Namlifa (The National Association of Malaysian Life Insurance and Financial Advisors) and MFPC (Malaysian Financial Planning Council) have given their assurance that the local insurance industry remains resilient.

They cited reasons such as stringent regulatory requirements, separate reserves and assets and separate structure between local subsidiary and parent company. Both are confident that the insurance companies would be able to fulfil obligations to policyholders.

Source: Business Times

AIA Gets Takaful Licence?

The Edge Weekly (September 22, 2008, page 20) seems to think that AIA has obtained a takaful licence to operate Ringgit businesses. It claimed that AIA is 1 of the 9 takaful operators in Malaysia.

While to my knowledge it is true that there are 9 takaful operators in Malaysia, my list of 9 operators does not include AIA.

I understand that AIA has obtained a licence to do non-Ringgit takaful business quite some time back, has the Edge got mixed up?

Your comment is most welcomed.

Article in The Star on AIA Quite Damaging

I find this article in The Star by Danny Yap on AIA quite damaging.

With due respect, the author may not understand well how insurance funds work. While a layman may have fear that the recent AIG's events may affect the security of their insurance policies, it is the responsibility of those (including reporters covering financial stories) who understand how insurance funds work to highlight the concept of separation of life funds and shareholders' fund.

For those who are not in insurance industry reading this post, briefly, insurance funds are created to hold policyholders' moneys and to meet liabilities to policyholders. Shareholders are not allowed to transfer money out of insurance funds unless there is a surplus in the fund and unless such transfer is recommended by the appointed actuary and approved by the Board. So even if shareholders run out of money, as long as insurance funds are solvent, policyholders should not be overly concerned that their policy liabilities will not be met. The rush to cash out their policies is therefore unneccessary.

A reporter would do a better job if he consults some experts in the industry before publishing an article purely highlighting one side of the story (in this case, highlighting the fear of those panic policyholders).

Articles on AIG - Part 3

More assurance from the company:

AIG’s Malaysian unit unaffected

Business as usual for AIG Malaysia

Development in Thailand, Hong Kong, Singapore and India:

AIG injects 14b baht into Thai banking unit

I think this one falls into the must-read category:

Where AIG Went Wrong

Other articles:

Why AIG was saved

AIG's new chief plans to keep company in business

Pru and Avivia tipped to benefit from AIG sale

ETF working on AIG-linked funds’ revamp

Insurance Industry Exposure to AIG and Lehman

I will update this as and when more figures are released on the insurance industry exposure to Lehman and AIG.

Exposure to Lehman

Aegon: £211 million
Aetna: $132 million
Aviva: £270 million
Friends Provident: £18 million
Hannover Re: €23 million
Munich Re: €350 million
Swiss Re: $45 million

Exposure to AIG

Aetna: $102 million
Aviva: £148 million
Swiss Re: $178 million

Source: Insurance Daily, Courant.com

Mark O'Dell Resigned from AIA Singapore

Mark O'Dell resigned on Thursday from AIA Singapore. It is believed that he is joining Manulife, Taiwan as General Manager.

AIA said that Mark's resignation is not related to the recent events affecting AIA/AIG.

Source: Reuters

MAA Takaful's Funds to be Managed by CIMB

CIMB-Principal Asset Management Bhd has been hired by MAA Takaful Bhd to manage the latter's following investment-linked funds:

• Syariah Growth Fund
• Syariah Balanced Fund
• Syariah Income Fund

Source: Business Times

PacificMas and OSK Cease Talks

PacificMas Bhd and OSK Holdings Bhd have mutually agreed to cease all negotiations in relation to the proposed disposal of Pacific Insurance by PacificMas.

No reason was given for the call-off of talks.

Source: The Star

More Articles on AIG

AIA chief: It’s business as usual

AIA: Local ops strong, well capitalised

Insurer's roots run deep in Asia

Fed takes control of AIG in US$85b bailout

Citigroup sees AIG’s mark-to-market loss at US$20b

US stocks tumble after government bailout of AIG

Will AIG plan cost taxpayers money, or just sleep?

Short-term US Treasury demand soars after AIG bailout

News Articles on AIG

We have all been flooded with news articles on AIG in the last few days. These include AIG seeking financing from Fed, rating downgrade, assurance that liabilities in Singapore and Malaysia can be met etc.

We provide the links below for those who want to find out more:

AIG plans US$20b asset selloff: Paper

AIG allowed to borrow from units, shares sink

AIG seeks US$40bil financing from Fed

Fitch downgrades AIG’s debt ratings

AIG seeks up to $75bn from Golman Sachs and JPMorgan

AIA Singapore can meet liabilities

Investors throng Singapore office of AIG unit

Group of AIG investors may come to the rescue

AIA: Turmoil in US will not hurt Malaysian ops

AP Sources: AIG US$85b bailout plan imminent:

Shares on WaMu, Wachovia recover on AIG hopes

Fed confirms US$85b rescue loan for AIG

US Government bails out AIG with US$85bil loan

AIA Malaysia unaffected by US woes

HLA's Strategies

Hong Leong Assurance Bhd (HLA) has come up with strategies to strengthen its life and general insurance businesses:

• Distribution: Increase number of quality agents, more comprehensive training programmes. Leverage on Hong Leong Bank for bancassurance and introduce insurance specialists in bank by early next year.
• Products: Innovation. Premier Cash, AUD Guaranteed Income Savers Plan and HLA Promise had done well.
• Enhancement of customer experience: Continue to improve systems and procedures
• Strengthen personal lines of GI: Focus on PA, home fire and content to increase underwriting profits

Some statistics:

• Market share: Life (6.3% ), General (4.4%)
• Rank: Life (6th), General (7th)
• Agency: 4% of industry agency force
• Life regular premium: RM140 mil compared with RM77 mil a year earlier
• GI underwriting profits: RM20.8 mil (FY2008) vs RM14.8 mil (FY2007)

Sourcve: The Star

Retakaful Potential in Indonesia

MNRB Retakaful will concentrate on Indonesia and Britain as growth at home grinds to a halt.

Indonesia's general retakaful market is expected to grow at double-digit rates or more in the next 2 to 3 years. The Indonesian authorities are expected to impose a ruling requiring retakaful cover (instead of conventional reinsurance) for takaful business.

Source: Business Times

Annuity Plus

While annuity is not a common product in this market, it is worth knowing some of the latest development overseas in underwriting and product design of such product.

Legal & General has introduced a product called Annuity Plus, which claims to provide 12% higher annuity payments to certain annuitants.

This is achieved by adding further rating factors in addition to age and gender. Additional information is sought at underwriting stage which includes smoking habits, blood pressure, height & weight, cholesterol and diabetes, post code. Depending on the underwriting outcome, an individual may get additional annuity payment.

Source: Insurance Daily

AIG Provides PA to DiGi's Customers

AIG General Insurance (M) Bhd has partnered DiGI to offer 5 mil DiGi's subscribers free PA coverage worth RM10,000.

DiGi commented that it was "looking to innovate beyond telecommunications, especially in traditionally-bound industries such as insurance, to create a new way for people to get insured."

It sounds to me that AIG may explore using DiGi as a new distribution channel or DiGi is interested to talk to other insurers to distribute their products to DiGi's customers. 5 million is a big number, any taker? How about Maxis and Celcom?

Source: The Star

FY 2008 Results - Hong Leong Assurance

For the FY June 2008, Hong Leong Assurance (HLA) posted a lower pre-tax profit of RM105.7 mil, compared with RM117.5 mil in FY 2007. HLA attributed the results to the poor market performance.

Other facts:

• Revenue: RM1.49 bil (2008) vs RM1.43 bil (2007), growth: 4%
• Gross premium: RM1.21 bil (2008) vs RM1.17 bil (2007)
• Life gross premium: RM782.1 mil (2008) vs RM740.1 mil (2007), growth: 5.7%
• General gross premium: RM425.8 mil (2008) vs RM433.4 mil (2007). Reason: tighter risk management, better underwriting profit.

Business performance/strategies:

• Overwhelming response to new product: Premier Cash
• Increase life agency force from 3,000 to 4,000 in FY 2009
• Distribution: to leverage on Hong Leong Bank's wide network of branches

Source: Business Times

Swiss Re Expects Rates to Fall

Swiss Re expects reinsurance rates to fall in most locations and in most lines of business. The better rates are due to lower claims from natural disasters in 2006 and 2007.

Source: Business Times

Investors still prefers capital protection

CIMB Aviva conducted a survey of 200 people and found that 67.9% of them prefers to invest in a product that provides: 1) capital protection 2) investment diversification and 3) insurance/takaful protection.

74% prefers Asian market such as China, India, the Philippines, Indonesia, Thailand and Malaysia. 10.7% prefers Australia and 5.4% opts for North America.

CIMB Aviva launched a product called Market Select last month that provides features similar to the preferences above.

Source: The Star

Takaful Puteri

Prudential BSN Takaful launched 2 new riders: Takaful Puteri and Takaful Puteri Plus.

Product features:

• To be attached to Takafulink Plan
• Entry age: 19 to 60
• Expiry age: 60, 70 and 80
• Takaful Puteri provides lady care benefits: women-related illnesses, specified treatments such as skin grafting due to skin cancer and burns, facial reconstructive surgery due to accidents
• Takaful Puteri Plus has mother care benefits which covers pregnancy complications and infant congenital illnesses
• 3 sums assured to choose from: RM50,000, RM100,000 and RM150,000

Source: Business Times & TAS Research

Dimension

Axa Affin Life Insurance Bhd launched a new product called Dimension.

Product Features:

• Whole life protection, access to 4 investment-linked funds
• Guarantees 4% of SA as annual income after 10 years in force and continues until age 100
• Target age group: 30 to 50
• Minimum annual premium: RM3,000
• Minimum SA: RM20,000
• Target premium: RM10 mil

Source: The Star, Bernama and Business Times

HSBC's New 3-Year Capital Protected Plan

HSBC Amanah Takaful launched another 3-year structured investment-linked plan on 2 Sept 2008. This type of product was first launched in March 2007 and generated RM92 mil contributions in 3-week period.

Some Features:

• Structured investment linked to the performance of a basket of 10 shares from China/Hong Kong, Taiwan and Korea
• Single contribution
• Capital protected
• Surplus sharing on maturity
• Minimum contribution RM20,000
• Offer period until 10 Oct 2008

Source: The Star & TAS Research

AIG Travel Assist

AIG Travel Assist opened its centre in Kuala Lumpur recently. There are 4 other such centres in the world, 2 in North America and 1 each in South America and Europe.

AIG Travel Assist provides assistance to policyholders who are covered under the travel assist product. The premium ranges from RM6 for domestic holidays to RM300 for annual package and it depends on holiday destination and length of stay.

Source: Business Times

Maybank Calls off PT Anugrah Deal

Maybank has decided to pull out of the PT Anugrah Life deal. In our earlier post, we reported that the approval by Indonesia's MOF lapsed on 4 August 2008 and both Maybank and Panin continued to seek resolution of partnership.

Indonesia however continues to be a target market for Maybank's insurance and takaful expansion and it will continue to look for other options in developing its presence in Indonesia.

Source: Bursa Malaysia

Update on Allianz

Allianz has embarked on an initiative to enhance productivity and competitiveness by streamlining its operations for both its general and life businesses within 20 months. The aim was to create a more customer-centric organisation.

On the integration of its general insurance business with that of Commerce Assurance Berhad (CAB), all CAB's branches have been integrated within 6 months.

2 products from Allianz: PowerWealth and PowerLink are gaining more importance.

PowerLink: Investment-linked product with optional riders: critical illness, H&S, waiver of premium, PA etc.

PowerWealth: Whole life plan, guaranteed cash payment is made every year after 8 years in force until age 90.

Source: The Star

Factors to Consider in M&A of Life Insurance Companies

Business Times interviewed 3 industry key players on the M&A and pricing of life insurance companies. Some of the key points mentioned were:

• Net asset value and price earning ratio are not the best tools.
• Complex and specialised skill set is required to assess the company's intrinsic value.
• An acquisition includes buying into the past and future of a business.
• You can be buying a problem that has not been identified yet, like high claims.
• It includes buying over the distribution channel such as the agency force.
• Life insurance business is capital-intensive and with a long gestation period.
• Local regulations are less attractive for foreign acquirer: ownership capped at 30%/49%.

Source: Business Times