Strategies of Prudential and Great Eastern

With liberalisation announced last year, the top 2 life insurance players are strategising for 2010 and beyond:

Prudential

• Expand bumiputera agency force, capitalising on its takaful licence
• Agents to become wealth planners, provide advice based on needs and risk profile of clients
• Expand bancassurance with the right partners
• Grow investment-linked business

Great Eastern

• Improve professionalism, leadership and selling skills of agents
• Grow bancassurance following tie-up with OCBC post liberalisation
• Target younger population and new entrants to job market

Source: The Star

Industry outlook by LIAM

LIAM expects new business to grow at 17% and 12.5% for year 2009 and 2010 respectively. 2010 should see introduction of micro insurance and annuity products to take advantage of tax relieves announced in the Budget.

With the completion of FSMP in 2010, further liberalisation would be seen in areas such as:

• allowing insurers to distribute other personal financial service products
• removal of caps on operating expenses
• granting of new licences for innovative players

The liberalisation measures announced in 2009 are expected to result in:

• more bancassurance partnership
• opening of more branches
• higher foreign equity holding
• application of the 2 new takaful licences

Source: Business Times 1 & 2

Great Eastern's growth factors

Great Eastern is counting on the following factors to further grow its business:

• Agents are better equipped with knowledge and training
• Current low insurance penetration rate, especially the younger workforce
  
• Introduction of affordable and well-rounded protection plans
• Advertising campaign to create awareness of the benefits of being insured
• Increase efficiency via IT, e.g. E-submission
• Capitalise on liberalisation thru bancassurance and establishment of new branches

Source: The Sun

Manulife's response to liberalisation

Manulife wants to add 5 new branches by 2011, location including Kuching and Penang. Currently Manulife has 6 centres nationwide.

For bancassurance, it intends to form more partnerships, focusing on local banks. Manulife's current bank partners are:

• OCBC Bank
• Alliance Bank
• Citibank
• HSBC Bank

Bancassurance currently contributes 10% of the business and the aim is to increase this to 33%.

Source: Business Times

STMB eyeing more than 50pc market share

STMB is eyeing more than 50% market share (by what measure?) and has identified general takaful and retail family market as the key growth drivers.

The following 3 new takaful products will be launched for FY 6/2010:

• Takaful myGraduan (protection and savings plan)
• Takaful myInvest (protection and investment plan)
• Takaful myGemilang (retirement plan)

The advantages of liberalisation according to STMB are:

• Increased innovation in products
• New technology

The disadvantages are:

• Market share of existing players reduced
• Staff pinching

Source: The Star

Star's article on RBC and liberalisation

I am puzzled with some of the statements in the article:

"The risk-based capital (RBC) framework, which came into force beginning this year, would also spur the insurers’ future earnings growth as it would allow them to be better capitalised"

How would better capitalised spur the insurers' future earnings growth? If an insurer was under-capitalised pre-RBC and now the capital is adequate, there should not be any impact on future earnings growth, or should it? I guess if an insurer has excess capital under RBC and they put it into better use by writing more businesses then there might be a positive impact on future earnings.

"For locally incorporated foreign insurers like Manulife Holdings Bhd and Allianz Malaysia Bhd, an analyst with an investment bank said the recent financial sector liberalisation measures was a boon to their business as it had allowed them to tie up with more than one bank to distribute products."

I thought prior to liberalisation, foreign banks could not tie up with foreign insurers in bancassurance. There was no limit on the number of bancassurance partners though. For example, foreign insurers could tie up with more than 1 local bank. This restriction is of course removed following liberalisation.

I stand to be corrected on the above.

Source: The Star

Charlie's interview with press

Prudential's CEO Charlie E. Oropeza was interviewed by The Star. Some of the points mentioned in the interview:

• Liberalisation: widen penetration, greater competition, encourage innovation
• Bancassurance: complementary rather than competing
• Consumer awareness on importance of insurance still has room to improve
• Prudential's strategy on agency force: solutions providers, not product pushers

Source: The Star

Uni.Asia partners UOB

Following the financial liberalisation, Uni.Asia and UOB are the 2nd group to announce bancassurance venture. Great Eastern and OCBC made similar announcement last week.

Some details:

• New business premium target: RM350 mil over 2 years, from Gain Assure II
• Uni.Asia ranked 2nd in bancassurance NB regular premium in 2008, aims to be No. 1 in 1H 2009

Interestingly, Great Eastern sets RM18 mil bancassurance NB premium target for 2009 with OCBC.

Information on Gain Assure II:

• 10-year SP Par endowment
• Minimum income bonus of 3.5% p.a.
• Premium: RM5,000 to RM500,000
• Entry age:14 days to 60 years

Source: Business Times, The Star

Great Eastern partners OCBC in bancassurance

Great Eastern has tied up with OCBC in bancassurance. Such tie-up of foreign-owned bank and foreign-owned insurer was not permitted before the liberalisation of the market.

2 new bancassurance products were launched: MaxMoney Plus and MaxMoney Back.

Targets set:

• MaxMoney Plus: RM12 mil by end 2009
• MaxMoney Back: RM6 mil by end 2009
• OCBC to have 10-15% market share in bancassurance in the long term

Source: The Star, Business Times

Manulife wants takaful licence

Manulife will apply for a new takaful licence by end of October. Malaysia recently announced that 2 new takaful licences would be granted this year.

Takaful penetration rate is currently at 7%, lower than the 40% in the conventional side.

Manulife currently has a takaful operations in Indonesia and intends to expand to the Philippines, Thailand and China.

Manulife has not decided whether it will increase its stake in the operations in Malaysia following the liberalisation.

Manulife's targets in 2009:

• New business premiums: 5% more than RM63 mil achieved in 2008
• 2 protection-related products in 2009

Source: The Star

Lot of enquiries on liberalisation

BNM received a lot of enquiries on all areas related to the recently announced financial liberalisation, including issuance of new licences.

Source: Business Times

Liberalisation of financial sector

The details of the liberalisation of the financial sector announced by PM and BNM (those relevant to insurance and takaful):

• Up to 2 new family takaful licences to be granted in 2009 (all existing takaful licences are composite, the new ones seem to be restricted to family takaful business only)
• Limit on foreign shareholding in insurance and takaful companies increased to 70%
• Case-by-case consideration for limit beyond 70% if players can facilitate consolidation and rationalisation of the insurance industry
• Restriction on establishment of branches imposed on locally-incorporated foreign insurers and takaful operators uplifted
• Restriction on bancassurance tie-up imposed on locally-incorporated foreign insurers and takaful operators uplifted
• Greater flexibility to employ specialist expatriates
• Offshore insurance companies licensed under Lofsa can have physical onshore presence from 2011 after meeting predetermined criteria

Industry statistics:

• Financial sector contribution to GDP: 9.2% (2000), 11% (2008)
• 2006-08: Finance and insurance sector grew 8.8%, GDP growth 6%
• 2004-08: Islamic banking and takaful sector grew 20%
• >140,000 workers employed in banking institutions and insurance companies

Source: BNM's Press Statement, PM's Press Statement, Issuance of Family Takaful Licences