Dato' Aminuddin Md Desa returns as CEO

Dato' Aminuddin Md Desa is going back to Maybank Fortis Holdings as its CEO effective 1 Nov 2008.

Dato' Aminuddin has over 20 years' working experience in the insurance industry. He was the Chief Executive Officer of Takaful Nasional Sdn Bhd from 2001 to 2005 prior to being appointed as the Chief Executive Officer of Mayban Fortis Holdings Berhad in December 2005, a position he held until 30 November 2007.

From 1 December 2007 to 30 January 2008, Dato' Aminuddin was CFO designate for Maybank Group and he became the CFO from 31 January 2008, a position he held until 30 October 2008.

Source: The Star, Maybank & Bursa Malaysia

AmLifestyle

AmAssurance launched a new investment-linked product called AmLifestyle.

Some of the product features:

• Funds managed by AmInvestment Management Sdn Bhd
• Annual premium from RM1,800
• 1st 2 switches in a policy year are free
• Subsequent switches are subject to a maximum charge of RM50 per switch
• Minimum amount to switch: RM500 or entire fund
• 3 AmLifestyle packages available

Some of AmAssurance's business targets:

• RM77 mil first year premium collected
• 20% business growth

Source: Bernama

Secure Income Plus - the Main Product for Manulife

Secure Income Plus seems to be doing well for Manulife. Since the launch of the product in July 2008, Manulife has collected more than RM50 mil in premiums. The target for this year is RM100 mil and in 2009 RM200 mil.

Secure Income Plus will contribute >50% of the total NB premiums of Manulife this year.

To sign up for the Plan, one needs at least US$30,000 although Manulife recommends customers to put in at least US$100,000.

Source: The Star

EasyLife Solutions

CIMB Aviva launched a new investment-linked product - EasyLife Solutions.

EasyLife Solutions has 4 plans to choose from:

1. EasyLife Kids
2. EasyLife Men and Women
3. EasyLife Retirement
4. EasyLife Money Back

Sales targets over the next 12 months:

• 24,000 policies
• RM13 mil premiums

Takaful version of the product will be launched within the next 12 months.

Source: Business Times

STMB Declares 15% Mudharabah Payment

Syarikat Takaful Malaysia Bhd (STMB) has declared a 15% Mudharabah payment for participants of its general takaful products and selected family takaful products. The payment was the 3rd this year.

Source: The Star

Mark-to-market Rules Relaxed

The mark-to-market rules have been relaxed for the banks in Malaysia. The rules no longer apply if the banks move the trading portfolios to their long-term books.

Mark-to-market rules can deplet banks' capital in credit turmoil even though the assets of banks have yet to default.

Source: The Star

No Bonuses for Some AIG's Executives

The executives of AIG Financial Products will not have their bonuses. AIG Financial Products was the particular business responsible for AIG's heavy losses, and the unit and its staff are now paying the price through the bonus freeze.

Source: Insurance Daily

DBS to Compensate Customers

DBS has decided to compensate customers who bought into Lehman's minibonds. The bank actually admitted that the sale of Lehman's minibonds did not meet the bank's standards in some cases.

Source: Business Times

Prudential has twice the capital required under RBC

Prudential has twice the solvency capital required under RBC. It also achieved 39% new business growth in Q3 2008. For 1st 3 quarters in 2008, new business sales went up 20%.

While consumer confidence will be affected with the recent financial turmoil, Prudential is confident that it can weather the crisis due to its strong corporate governance and risk management.

Source: Business Times, The Star

Prudential Retire-Meter 2008

Some of the findings from Prudential Retire-Meter 2008:

• 40% Malaysians felt the need to continue working after retirement due to insufficient retirement fund
• 36% of people were less confident about their retirement compared to last year
• 81% said inflation had gone up and affected their lifestyles
• 72% said they saved, 77% of this 72% invested in low-yielding savings vehicles
• 41% did not know how much was enough for retirement
• 64% did not separate retirement savings from other savings

The survey was based on 1,024 Malaysians from key urban centres in both East and West Malaysia, with a monthly household income of at least RM3,000.

Source: Business Times

ING Interested in AIG's Asian Businesses

More companies have expressed interest in buying AIG's Asian businesses. We reported previously that Tata Sons and Prudential were interested. The latest is India's Reliance Anil Dhirubhai Ambani Group (ADAG) and ING are eyeing AIG's Asian businesses as well.

Source: Insurance Daily

Etiqa Sells GHS to IRB

Etiqa Insurance closes a Group Hospitalisation & Surgical (GHS) scheme with Inland Revenue Board, covering over 9,000 IRB employees and 18,500 immediate family members of the employees. Premium is expected to be RM6.6 mil in the first year.

Source: Business Times

Prudential to acquire AIA?

Prudential apparently is in talks with investors in the Middle East and Asia to raise capital to buy parts of AIG's operations in Asia. It is estimated that this will cost US$15 bil.

We reported earlier that AIG wanted to retain a majority interest in the AIA companies. If this is still the case, it would be very surprising for Prudential to take a minority stake. Prudential is already present in most markets along side with AIA, and most regulators will not allow a company to hold 2 insurance licences in the same market.

The remaining possibility is there is a change in mind in AIG, they may now want to sell off some AIA's units to repay the loan from the Fed. If this is the case and Prudential turns out to be the successful bidder, we will see Prudential replacing AIA as the largest insurance player in Asia.

Source: Telegraph

Fubon to acquire ING Taiwan

Fubon Life Insurance will acquire ING Taiwan to create Taiwan's 2nd largest insurance company with assets totalling US$30.5 bil.

Source: The Star

Insurance Companies Strategies in Facing Crisis

How are insurance companies in Malaysia handling the current financial crisis?

Allianz Malaysia Bhd

• Tapping on group's worldwide best practices: underwriting, claims, investment, IT etc
• Streamlining both general and life businesses
• Prudent investment strategy backed by well defined investment mandates, guidelines and limits

Manulife

• Have good risk management system and practices in product design, investment management and asset liability management
• Strict criteria in evaluating both fixed income and equities investment

Hong Leong Assurance

• Well diversified investments
• Minimum exposure to equity market, mainly in sound dividend-yielding stocks
• No exposure to collateralised debt obligations
• Investments mainly in local market

Source: The Star

ING Receives Capital Injection

ING Groep NV will receive capital injection of US$13.4 bil from the Dutch government which will see the latter becoming a major shareholder of the former. With the capital injection, ING's core Tier-1 capital ratio will improve from 6.5% to 8%.

Source: The Star

Tata Sons Interested in AIA

Tata Sons, the holding firm of India's 2nd largest conglomerate, is reported to be interested in acquiring a 49% stake in AIA. However, both Tata Sons and AIG have not provided confirmation on the M&A talks.

Source: Business Times

Minibond Holders Potentially Lose S$639 mil

The Monetary Authority of Singapore (MAS) said that about 10,000 people in Singapore bought a total of S$639 mil of the failed Lehman mini bonds. A number of these people are retirees, losing their lifelong savings, some even contemplate commiting suicide.

MAS is investigating the complaints filed by the investors accusing the financial institutions of mis-selling. Financial institutions that were involved in the seling of Lehman mini bonds include DBS Group, Hong Leong Finance, UOB Kay Hian, OCBC Securities and ABN AMRO, now part of the Royal Bank of Scotland.

Source: Asiaone Business, Business Times

Insurance Shares Fell Sharply

Shares in ING, Prudential and Aviva slided recently as a result of market turbulence.

In UK, share prices of Prudential and Aviva fell sharply. There are indications that the Financial Services Authority (FSA) may ease the capital requirement of UK insurers with writedowns in their investment portfolios.

In Netherlands, ING reported Q3 losses of around US$670 mil, due to US$2.7 bil in various investment losses, write-downs and bad loan provisions. The ING shares fell significantly.

Source: Insurance Daily, The Star

Takaful Ikhlas Eyes 20% Market Share

Takaful Ikhlas which current has 11% takaful market share is aiming to achieve 20% market share in 2010.

In FYE 31 March 2008, the company collected RM428 mil contribution. For FY2009, the targeted contribution is RM520 mil, but this has been subsequently revised to RM600 mil.

Source: Business Times

Actuaries to Study Feasibility of Retrenchment Fund

Actuaries will be involved in studying the possibility of a retrenchment fund in Malaysia. The Human Resources Mininster said that the government was in the midst of studying the implications of setting up a retrenchment fund for workers.

“The ministry has held discussions at various stages and we have now asked actuarial and International Labour Organisation experts to help us."

Source: The Star

BNM Gives Assurance on Financial System

BNM has released a press statement assuring that the Malaysian Financial System can weather the current global financial turmoil. Among the points relevant to insurance industry:

• Ample liquidity in the financial system
• Insurance industry is operating with adequate capital and liquidity buffers
• Negligible exposure to both sub-prime related securities and to the affected financial institutions of other countries
• More than 90% of total assets in ringgit denominated assets
• All foreign financial institutions are locally incorporated
• The insurance industry recorded high solvency surplus of RM16.5 bil as at end-August 2008

Source: BNM

HLA Promise Looks Promising

HLA has given assurance that it is not affected by the current financial crisis as almost all its assets are locally invested.

HLA's new product, HLA Promise, has also exceeded RM50 mil in annualised premium in less than 3 months.

Source: Business Times

Allianz Moving to the Top

Allianz is confident that it will be the top general insurer in terms of market share by end of the year. Allianz at present has 10% market share and with "very encouraging" Q3 results, it is confident that it will be the largest general insurer for 2008.

According to the industry statistics, in year 2007, based on Gross Direct Premium, the top 3 general insurers were: Kurnia, Mitsui Sumitomo and Allianz with respective market share of 10.92%, 6.72% and 5.93%. With the acquisition of Commerce Assurance (market share: 3.53%), Allianz would have moved to the 2nd position with market share of 9.46%.

Key strategies for Allianz:

• Customer segmentation
• Product development and pricing
• Co-locating life branches close to the general unit

Source: Business Times

Increase Capital to Weather Financial Storm

Daljit Dhesi of The Star has commented that the worldwide credit crunch was a wake-up call for insurers in Malaysia to increase capital to weather the financial storm.

Comment was also made on increasing capital to be in compliance with RBC. "The RBC framework to be implemented in January 2009 will benefit policyholders and insurers as the latter will become stronger and more competitive globally to face the growing challenges."

Source: The Star

MAA Takaful Teams Up with Celcom

MAA Takaful Bhd has teamed up with Celcom to sell PA Takaful Scheme to mobile subscribers of the latter. This follows similar scheme offered by AIG to Digi's subscribers.

In our Post dated 12 September 2008, we raised the question whether Maxis and Celcom would follow suit. Celcom has responded, will Maxis be next?

Scheme features:

Celcom Blue Prepaid

• Free RM20,000 PA for 1st year
• RM12 contributions per year from 2nd year onwards

Postpaid Customers

• RM40,000 PA

Xpax Customers

• RM1 contribution per month from day 1

MAA Takaful targets RM2-3 mil contribution from this product in the 1st year of launch. Celcom has 8 mil subscribers, 3 mil more than Digi.

Source: The Star, Business Times

Lonpac Delivers Despite Tough Environment

Lonpac Insurance has quite impressive scorecard despite difficult economic environment:

• 14% growth in net premium income (RM293.2 mil compared with RM257.1 mil)
• Solvency margin surplus of RM221.2 mil on top of the minimum required solvency margin of RM490.2 mil)

The holding company LPI Capital saw 14.4% growth in net profit and 16.6% growth in revenue.

Lonpac's investment portfolio: 70% in FD, 20% in equities (mainly in Public Bank shares) and 10% in government securities.

Source: The Star

Middle East Investor Involved in MAA's Privatisation

There is new speculation that MAA will be taken private using fund from a Middle East investor. The fund will also be used for fresh capital injection to improve solvency ratio.

MAA has been in discussions with various parties in the past on M&A. The parties included Allianz, Axa, Kurnia and Nippon Life.

Source: Business Times

Yamato Life Goes Under

A medium size insurer in Japan, Yamato Life Insurance, has gone bust. It has debts of $2.7 bil and fell US$111 mil in the red because of drastic fall in global stock prices.

Source: The Star, Insurance Daily

AIG Getting Another US$37.8 bil

AIG has requested another $37.8 bil loan from the Federal Reserve, in addition to the $85 bil loan facility from the central bank.

"The existing $85 billion New York Fed loan facility has been used, in part, to settle transactions with counterparties returning these third-party securities to AIG. This new program will allow AIG to replenish liquidity used in settling those transactions, while providing enhanced credit protection to the New York Fed and U.S. taxpayers in the form of a security interest in these securities", according to Federal Reserve.

Source: Insurance Daily, Federal Reserve

Asia's Insurance Industry is Strong

Asia's insurance industry is strong enough to withstand the current financial market turmoil, according to S&P. "Rated insurers that have strengthened their balance sheets over the past 5 years are expected to ride out the storm without major rating changes".

Other points mentioned in the S&P's report:

• Negative outlooks on Singapore and Taiwan's life insurance sectors.
• Operating performance is likely to deteriorate in 2008 due to plummeting investment profits.

Source: The Star

Boards Can't Confirm on Privatisation

The Boards of Melawar Group and MAA Holdings Bhd are not able to confirm Tunku Ya'acob's remark that MAA may be taken private.
"The Boards are only able to comment after they have made due enquiries with the major shareholder, who is currently overseas."

Source: The Star

ACR Targets Malaysia, Indonesia and Brunei

ACR ReTakaful SEA will focus on Malaysia and Indonesia markets which have potential growth rate of 20% or more and 30% or more respectively.

Brunei is another market that ACR ReTakaful SEA willl target.

Year to date, ACR ReTakaful SEA has collected RM20 mil in contributions, this compares with 18-month target of US$40 mil to US$60 mil.

During the initial period, ACR ReTakaful SEA can also accept halal risk from conventional insurers.

Source: Business Times

Manulife's CEO Resigns

Peter Robertson, the CEO of Manulife Insurance (Malaysia) Berhad, has resigned and he would leave the company on 11 November 2008.

Peter joined Manulife in 2006. He is an actuary (Fellow of the Faculty of Actuaries) by training.

Source: Bursa

What Went Wrong with AIG?

Interesting findings from the probe into AIG's saga so far:

• AIG's executives were sent on a $440,000 retreat to posh California resort, less than a week after the federal government bailed out the Group
• AIG executives hid the full range of its risky financial products from auditors as losses mounted

On what went wrong, you will hear Greenberg blaming his successors, and his successors in turn blaming mark-to-market accounting rules. Read for yourself the following 2 news articles which are similar, I think good risk management lessons can be learnt from there.

Source: The Star 1 & 2

Impact on Malaysia Insurance Industry

How is the local insurance industry affected if the financial crisis that has hit the US and Europe worsens? The Star reported the following views from the industry players:

Unnamed insurer: “If the credit crunch persists, it may affect the performance of insurance companies as it will have an impact on the local economy, hence affecting spending.”

Allianz Malaysia Bhd: Minimal impact on the company as has minimal exposure in foreign investments, difficult to predict the outcome should the credit crisis persist.

Manulife: Growth might be slow but sales would continue to grow.

Hong Leong Assurance: Business expected to grow as economic downturns create a need for insurance protection. Investments are maily in the local markets, no exposure to CDOs and exotic instruments. Exposure to stock market kept to a minimum and in sound dividend-yielding stocks.

MAA may be Taken Private

MAA Holdings may be taken private by the Melawar group, as the stock is "grossly undervalued".

Tunku Ya'acob said he would "definitely consider doing a voluntary general offer for MAA Holdings if he could raise money".

On the sale of MAA's general insurance business to AmG Insurance Bhd, the price has been agreed upon and the deal would be concluded in 3 months.

MAA has presence in:

• Indonesia: PT MAA Life Assurance, PT MAA General Assurance
• Philippines: MAA General Assurance Philippines, Inc. and MAA Mutualife Philippines, Inc.

Source: Business Times

AIA's Next Generation Strategy

Targets:

• Doubling new business (NB) premiums over the next 3 years!
• Maintain at least 20% growth in NB premiums in 2008

Details of Next Generation Strategy:

• Inject "younger blood" into the group sales force to reach a younger group of customers (existing agency force: 9,000, target by November 2008: 10,000)
• Target 20 to 30-year-old age group customers
• Set up Next Generation Centres in Kuala Lumpur, Penang and Johor Baru (budget: RM8 to 10 mil for the 3 centres)

Source: The Star

TM Asia's Plan for Branches

TM Asia will continue to relocate its branches in Malaysia to a more strategic location. This year, TM Asia has relocated its headquarters and Butterworth office.

Offices to be opened: Klang, Selangor and Sibu.

Source: Business Times

Fortis Insurance is still 100% Owned by Group

Fortis Group has clarified that it still maintains 100% ownership in Fortis Insurance Internation NV, after the recent sale of Fortis banking and Belgian insurance activities in Europe.

Mayban Fortis - the insurance and takaful unit of Maybank, continues to be owned by Maybank (69.05%) and Fortis Insurance International (30.05%).

Fortis Insurance International's other insurance activities:

• Wholly owned: UK, France, Hong Kong
• Joint ventures: Luxembourg, Portugal, China, Malaysia, India and Thailand

In related news, BNP Paribas has scooped up Fortis' assets in Belgium and Luxembourg after paying US$20.1 bil. BNP will get 75% of Fortis Bank Belgium and Belgian insurance operations, and 66% of Fortis Bank Luxembourg.

Source: Business Times, The Star

Kurnia's RM400 mil Capital Injection

Kurnia plans to inject RM400 mil capital to strengthen its paid-up capital to RM600 mil.

On regional expansion, Kurnia has acquired PT Kurnia Insurance Indonesia (mid-size general insurer), and plans to acquire Kurnia Insurance Thailand Co Ltd. There is also a joint-venture in Cambodia undertaking general and life insurance businesses.

Unaudited financial results for FY2008 ending 30 June:

• Net loss of RM301.8 mil (FY2008) vs net profit of RM2.5 mil (FY2007)
• Loss per share 20.26 sen (FY2008) vs earnings per share 0.17 sen (FY2007)
• Gross premium income: RM1.12 bil (FY2008) vs RM1.11 bil (FY2007)
• Increase in technical reserves to RM1.88 bil to comply with RBC requirements
• Investment income: RM93.2 mil (FY2008) vs RM182 mil (FY2007)
  

5 critical pillars of transformation to enhance productivity and profitability:

• Organisation leadership
• Growth in non-motor sectors
• Distribution
• Underwriting
• Claims

Source: The Star, Business Times

Philamlife will be Sold

Philamlife (Phillippine American Life and General Insurance Co), the Phillippine unit of AIG is to be sold. Philamlife has been a leader in the industry for past 61 years.

Earlier, we reported 3 Japanese business units of AIG are to be sold as well.

Source: The Star

Impairment on Ping An's Books

Ping An Insurance willl book in an impairment charge of US$2.3 bil in Q3 on losses from its investment in Fortis.

Ping An paid US$2.5 bil for a 4.2% stake in Fortis in November. Fortis' operations in the Netherlands were taken over by the Dutch government recently.

Source: Business Times

Minority Shareholders for AIA

AIA has decided that it would introduce minority strategic investors.

"AIG would retain a majority interest in the AIA companies but would seek out minority strategic investors that would ensure the AIA companies' ability to grow to their full potential in future years."

Source: The Star

AIG to Sell 3 Life Businesses in Japan

AIG plans to sell its 3 life insurance businesses in Japan (American Life Insurance Co., AIG Star Life Insurance Co and AIG Edison Life Insurance Co) but to retain the property & casualty unit.

The combined price for the sale could top $9.5 bil.

Source: Reuters

Takaful Ikhlas to Apply for ICBU Licence

Takaful Ikhlas is planning to apply for international currency business unit (ICBU) licence in 2009. It is currently in discussion with a few parties in GCC (Gulf Cooperative Council), the Middle East and North Africa regions to distribute its family takaful products.

Source: Business Times

Which Regulator to be Blamed for AIG's Crisis

With AIG's crisis resulted in $85 bil federal bailout, who should be blamed, the state or federal regulators?

Would the crisis have been avoided if the US adopts a centralised federal regulation?

What risk management lesson do we learn from here?

I suggest you read the source article and draw your own conclusions.

Plenty of Buyers for Philamlife

There is no shortage of buyers for AIG's unit in the Philippines: Philamlife. However, AIG has not decided whether it is selling the unit.

Philamlife has interests in insurance, asset management, banking and outsourcing.

Source: Insurance Daily

Weak Investment Returns for Insurers

The Star is predicting weak investment returns for insurance companies due to the poor performance of the financial markets following the crisis in the US.

However, investment returns will remain positive over the longer period.

The solvency ratio was 120.6% at end of 2007, well above the regulatory minimum.

Manulife meanwhile believes that insurance is counter-cyclical and people tend to save more and cut back discretionary spending during current market conditions.

Source: The Star

Citibank to Distribute Secure Income Plus

Citibank Bhd has been appointed by Manulife to distribute its investment-linked retirement income plan - Secure Income Plus.

"Citibank has strong network customers who fit the profile of the Secure Income Plus target market", according to Manulife.

Source: The Star

Aureos Capital Interested in Pacific Insurance

Pacific Insurance has a new potential owner. Aureos Capital Ltd has obtained BNM's approval to start preliminary talks with PacificMas Bhd to acquire Pacific Insurance.

According to Aureos Capital's website, they are "a leading global private equity fund manager focusing on investments in small to mid-cap enterprises in emerging markets worldwide".

Source: The Star