Tuesday November 10, 2009
Keen interest to set up Islamic banking operations in Malaysia
KUALA LUMPUR: The applications for two new Islamic banking licences, which are part of the financial sector liberalisation plan, are still being processed, according to Deputy Finance Minister Datuk Dr Awang Adek Hussin.
“Bank Negara at the moment is processing the applications and making the necessary evaluations. The decision will be made by the central bank in the best interest of the financial sector.
“I was informed that there have been quite a number of applications as well as keen interest from other players to set up Islamic banking operations in the country,” he told a press briefing in conjunction with the Islamic Financial Planning and Wealth Management Conference 2009 (IFPC 2009) here.
In April, the Government announced a financial sector liberalisation plan that included the issuance of licences for seven banking and two takaful players from this year until 2011. It also, among others, eased foreign ownership rules by increasing limits of equity ownership to 70% from 49% for investment banks, Islamic banks, insurance companies and takaful operators.
From left: Financial Planning Association of Malaysia president Wong Boon Choy, Organising Committee IFPC 2009 chairman Datuk Ibrahim Muhammad, Datuk Dr Awang Adek Hussin and Islamic Banking and Finance Institute Malaysia CEO Datuk Dr Adnan Alias at the opening of the IFPC 2009 conference on Monday.
On whether there would be further liberalisation in the financial sector, Awang Adek said it would be done in stages and more would come over time.
“When the time is right and we think we are ready for the next step, we will take it. I don’t think this is the end of liberalisation,” he said.
He noted that the Islamic banking sector had registered double-digit growth over the past eight
years with an average annual growth rate of 20% in terms of assets.
As at end-June, the share of Islamic banking assets in the banking sector had expanded to 19% from 6.9% in 2000. Given the growing maturity of the local bond market, Awang Adek said it was timely that Malaysia offered its own “brand proposition”.
This was to distinguish foreign currency-denominated bonds and sukuk originating from the country in global capital markets, he said.
He added that Petroliam Nasional Bhd had become the largest issuer of US dollar-denominated bonds and sukuk in Asia ex-Japan with the issue of US$3bil worth of bonds and US$1.5bil of sukuk.
Awang Adek also called on Islamic and conventional advisors, including financial planners, to capitalise on the potential growth of syariah-compliant financial sectors, such as the financing-protection segment, where previously Muslims were not able to participate due to a lack of syariah-compliant products.
The increasing demand for Islamic financial products necessitates financial planners to be equipped with the knowledge of syariah requirements of Islamic finance and such expertise was a potential area for growth, he said.
http://biz.thestar.com.my/news/story.asp?file=/2009/11/10/business/5074249&sec=business
Tuesday, November 10, 2009
Saturday, September 19, 2009
Bright outlook for domestic takaful business
Saturday September 19, 2009
PETALING JAYA: The outlook for the domestic takaful business remains bright due to the limited number of takaful operators in the country and because almost 60% of the Malaysian population is still uninsured, industry players and analysts said.
Syarikat Takaful Malaysia Bhd (STMB) group managing director Datuk Hassan Kamil said with only eight takaful operators in the country and two more takaful licences to be issued by Bank Negara, there was plenty room for growth for takaful products.
In line with the positive outlook, STMB aims to increase its market share to more than 50% by aggressively growing its retail distribution capabilities.
“Our key growth drivers will mainly come from the general takaful portfolio and retail life market,” Hassan told StarBizWeek.
He added that in order to ensure continuous growth, takaful products needed to be innovative and transparent, together with professional sales and customer service.
Acting on this strategy, STMB has in the pipeline three new takaful products for its financial year ending June 30, 2010, namely Takaful myGraduan (protection and savings plan), Takaful myInvest (protection and investment plan) and Takaful myGemilang (retirement plan).
“High-tech information technology solutions are also necessary to support the dynamic and various distribution channels such as corporate sales, bancatakaful and retail divisions within STMB,” Hassan noted.
He said with many multinationalcorporations vying for the upcoming takaful licences, competition was stiff but it showed that the takaful market domestically and overseas was still quite attractive.
“In any business, further liberalisation will have a positive and negative impact to existing takaful operators. The positive impact from liberalisation will come from the increased innovation in products and technology introduced by new entrants to the industry.
“The negative impact will be that the existing players will have their market share reduced and perhaps some of their staff pinched by the new entrants,” he said.
An analyst with a bank-backed brokerage agreed with Hassan that Malaysia was an attractive destination for the insurance business due to its low penetration rate and expertise in takaful, a segment which many global insurers were keen to dip their fingers into. The analyst also noted that the takaful industry had been enjoying double-digit growth, in revenue as well as takaful fund assets, every year for the past few years, which was another factor to attract investors.
“There (has been) interest shown by foreign parties since the liberalisation announcement, but it could take some time for things to start moving,” the analyst said.
“This has a lot to do with pricing. With the current market conditions and uncertainty still in the air, foreign investors and shareholders are taking a wait-and-see approach.”
STMB’s net profit shot up 170% to RM39.21mil for the fourth quarter ended June 30 compared with RM14.65mil from the previous corresponding period.
But revenue fell 5% to RM365.07mil against RM383.19mil previously.
Earnings per share was higher at 24.08 sen from 9.24 sen previously.
STMB attributed the higher profit to better underwriting results from the general takaful fund and lower operating expenses.
Lower contributions from the family takaful fund as well as lower investment income were cited as reasons for the slight drop in revenue.
http://biz.thestar.com.my/news/story.asp?file=/2009/9/19/business/4750116&sec=business
PETALING JAYA: The outlook for the domestic takaful business remains bright due to the limited number of takaful operators in the country and because almost 60% of the Malaysian population is still uninsured, industry players and analysts said.
Syarikat Takaful Malaysia Bhd (STMB) group managing director Datuk Hassan Kamil said with only eight takaful operators in the country and two more takaful licences to be issued by Bank Negara, there was plenty room for growth for takaful products.
In line with the positive outlook, STMB aims to increase its market share to more than 50% by aggressively growing its retail distribution capabilities.“Our key growth drivers will mainly come from the general takaful portfolio and retail life market,” Hassan told StarBizWeek.
He added that in order to ensure continuous growth, takaful products needed to be innovative and transparent, together with professional sales and customer service.
Acting on this strategy, STMB has in the pipeline three new takaful products for its financial year ending June 30, 2010, namely Takaful myGraduan (protection and savings plan), Takaful myInvest (protection and investment plan) and Takaful myGemilang (retirement plan).
“High-tech information technology solutions are also necessary to support the dynamic and various distribution channels such as corporate sales, bancatakaful and retail divisions within STMB,” Hassan noted.
He said with many multinationalcorporations vying for the upcoming takaful licences, competition was stiff but it showed that the takaful market domestically and overseas was still quite attractive.
“In any business, further liberalisation will have a positive and negative impact to existing takaful operators. The positive impact from liberalisation will come from the increased innovation in products and technology introduced by new entrants to the industry.
“The negative impact will be that the existing players will have their market share reduced and perhaps some of their staff pinched by the new entrants,” he said.
An analyst with a bank-backed brokerage agreed with Hassan that Malaysia was an attractive destination for the insurance business due to its low penetration rate and expertise in takaful, a segment which many global insurers were keen to dip their fingers into. The analyst also noted that the takaful industry had been enjoying double-digit growth, in revenue as well as takaful fund assets, every year for the past few years, which was another factor to attract investors.
“There (has been) interest shown by foreign parties since the liberalisation announcement, but it could take some time for things to start moving,” the analyst said.
“This has a lot to do with pricing. With the current market conditions and uncertainty still in the air, foreign investors and shareholders are taking a wait-and-see approach.”
STMB’s net profit shot up 170% to RM39.21mil for the fourth quarter ended June 30 compared with RM14.65mil from the previous corresponding period.
But revenue fell 5% to RM365.07mil against RM383.19mil previously.
Earnings per share was higher at 24.08 sen from 9.24 sen previously.
STMB attributed the higher profit to better underwriting results from the general takaful fund and lower operating expenses.
Lower contributions from the family takaful fund as well as lower investment income were cited as reasons for the slight drop in revenue.
http://biz.thestar.com.my/news/story.asp?file=/2009/9/19/business/4750116&sec=business
Monday, August 17, 2009
Asian banks sought for deals
Monday August 17, 2009
PETALING JAYA: In the aftermath of the global financial crisis, Asian banks are increasingly being sought after for deal-making and capital raising.
“The financial crisis has been an eye-opener,” said RHB Investment Bank chief executive officer Chay Wai Leong.
“International liquidity has been very tight and in recent large fund raising exercises, domestic liquidity had played a crucial role.”
Many things that were literally unheard of in the past are happening:
·Asian banks going on international roadshows for local clients; and
·Increasing number of requests to participate in bilateral and syndication loans.
“The investment banking community reacts very quickly,” Chay told StarBiz.
Seeing the successful capital raising and backstopping in recent rights issues, global banks now appear to have “more respect” for local banking names.
“We know where the distribution is,” said Chay.
“Asian liquidity is very strong and is likely to play a big part in the upcoming initial public offering of the Asian life unit of American International Group Inc.”
The recent oversubscription to the substantial rights issues of Malayan Banking Bhd (RM5bil), TM International Bhd (RM5.25bil) and DBS Bank (S$2.8bil) indicates the power of domestic liquidity and the dynamic role of local banks.
“In the past, it could not be done,’’ said Chay. “That has opened the eyes of a lot of people that local banks are capable of handling huge deals and that has become a lasting impression.’’
“We are being invited to do deals beyond Malaysian shores,” said Maybank Investment Bank CEO Mohammed Rashdan Yusof.
“We are also getting requests from foreign companies outside of Asean.”
Previously the domain of prominent global names, the deal-making and banking markets are now increasingly being opened to Asian banks that are now big names themselves.
“There is a lot of lending from the banking market as capital markets are still tight,” said Rashdan, adding that requests for funding involved infrastructure, utilities and property development in the region.
Pointing to a renewed focus on Islamic capital markets, Rashdan said a funding mix of syndication loans as bridgers during the construction period and bonds in the form of Islamic finance were also becoming popular.
Chay sees the potential for more bond deals, pointing to the resurgence in the ringgit bond and sukuk markets. RHB had completed a roadshow in Kuwait, Qatar and Saudi Arabia where interest in the Malaysian sukuk market was still strong.
Global offerings
In terms of global offerings, Asian banks are growing in prominence. “The Asian bid is getting much larger in proportion to the global order book especially for strong Asian credits,’’ said Lee Kok Kwan, deputy CEO and group treasurer of CIMB Bhd.
CIMB has just brought to market Petroliam Nasional Bhd’s global US dollar offering of five-year sukuk and 10-year bonds for which issuance was upsized to US$4.5bil, representing the largest issuance to date out of South East Asia in 2009.
“The Asian bid of the order book was particularly strong and respresents a solid turnaround for future issuances of Malaysian credits,’’ said Lee. “It is also a clear example of the coming of age of some Asian banks to competently bring global issues to the market for corporate clients in terms of syndication, distribution and execution.’’
Moreover, the far-reaching impact of the Asian recovery, post-crisis, is not just on investment but also commercial banking.
“Coming out of this recession, the East has piled up savings to invest in its own economies,” Lee said.
Upcoming trends, according to Lee, include the faster rate of recovery for Asia and the BRIC (Brazil, Russia, India and China) countries; higher intra-Asian investments coupled with a potentially more inward-looking region, which bodes well for further expansion in infrastructure development.
Hard infrastructure is likely to be the emphasis in India and Indonesia, while China, having built much of its hard infrastructure, is focusing on its soft infrastructure such as rural development.
Due to sheer proximity, Asian banks are projected to be the major beneficiaries especially in terms of their retail and mortgage businesses, regional activities and movements.
“Credit decisions can be made faster by Asian banks that understand local companies better,” said Lee, adding that moves by Asian countries to develop their own currencies, loans and deposits as well as capital market systems would benefit local banks.
“This will reduce funding costs,” Lee explained, adding that local banks had a higher competitive advantage in their ability to raise local currency deposits.
“Once the push to domestic economies gathers steam, the full array of banking activities from retail to corporate will rise,” he said.
This will enable Asian banks to realise their vision of becoming regional champions.
So far, it appears that vast opportunities await Asian banks in terms of further business development. In terms of mergers and acquisitions (M&As), it may be a different ball game.
“If we take Asia to include Australia, the recent acquisition of the Asian operations of the Royal Bank of Scotland by the Australia and New Zealand banking group indicates that a fairly strong Australian bank has achieved its target of becoming a super regional bank,” said Rashdan.
Otherwise, M&As remain challenging for South East Asian banks, some of which had just completed large acquisitions as in the case of CIMB and Maybank.
Rashdan suggested a Chinese or Indian bank could embark on an acquisition, which may not be easy to execute, as seen in the integration and cultural issues faced by Nomura Holdings when it acquired the Asian operations of Lehman Brothers.
http://biz.thestar.com.my/news/story.asp?file=/2009/8/17/business/4530770&sec=business
Banks ready to implement new framework by January 2010
Monday August 17, 2009
On track for advanced Basel II approaches
PETALING JAYA: The country’s banks are on track to adopt advanced Basel II approaches by January next year and a delay in the implementation is not expected.
John Lee, KPMG head of Asia Pacific financial risk management and head of Malaysia financial services, said many banks were at various degrees of Basel II projects, covering enhancements of risk management governance and framework, and ongoing improvements in risk assessment, measurement and mitigation.
“Basel II is a pivotal milestone to achieve better risk and capital management,” he said.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz had said Malaysian banks were well positioned for the advanced implementation of Basel II in 2010.
Most banks, which have chosen to comply with the less sophisticated approaches of Basel II Pillar 1, which focuses on minimum capital requirements, are already in compliance with Basel II since January 2008.
However, some of the country’s banks such as Malayan Banking Bhd, OCBC Bank (M) Bhd and United Overseas Bank (M) Bhd have chosen to skip the adoption of the standardised approach and move towards the advanced approaches such as the internal rating based (IRB) approach for credit risk, where compliance is by January 2010.
Lee said that besides the Basel II Pillar 1 requirements, all banks were also working towards complying with Basel II Pillar 2 which focused on banks’ internal capital management and Pillar 3 on disclosure of risk management and market discipline, where the deadline indicated by Bank Negara was the beginning of 2010 (for banks which have adopted the standardised approach).
“These banks are certainly occupied in preparing and ensuring that various critical milestones are fulfilled to meet the impending timeline,” he added.
Malayan Banking Bhd project director (Basel II) Ariffin Morad said the group had obtained Bank Negara’s conditional approval to adopt the IRB approach in 2010.
“Bank Negara is in the process of reviewing our preparations and we expect final IRB certification before we implement,” he said.
According to Ariffin, Maybank has also made preparations for Pillar 2 and Pillar 3, in line with regulatory requirements.
“We have submitted a high-level Internal Capital Adequacy Assessment Process framework to Bank Negara in 2008.
“We will implement IRB disclosure requirements as set out by Bank Negara for Pillar 3,” he said.
OCBC Bank (M) Bhd and OCBC Al-Amin Bank Bhd plan to be ready to adopt Basel II IRB for credit risk by the stipulated deadline pending the release of the finalised IRB rules by the central bank.
OCBC Bank country chief risk officer Choo Yee Kwan said: “We are currently on track to comply with Bank Negara’s IRB rules by January 2010.”
Pillar 2 for credit risk would follow a year after implementation of Pillar 1, he added.
“Although Pillar 3 for the credit risk timeline in the country has yet to be determined, OCBC, at group level, has included Pillar 3 market disclosure in its 2008 annual report,” he said.
United Overseas Bank (M) Bhd director and chief executive officer Chan Kok Seong said the bank was also currently preparing the necessary processes to implement the IRB approach for credit risk.
“Where reporting to the local authority is concerned, we still report under the Basel I regime and will need Bank Negara’s certification to migrate to the advanced approaches for credit risk.
“We are ready to adopt Basel II from 2010 onwards, subject to Bank Negara’s validation,” he said.
KPMG’s Lee noted that locally incorporated foreign banks, such as OCBC and UOB, had the necessary infrastructure to comply with the advanced approaches of Basel II as their parents, which are international banks, would have already adopted the approaches in other countries.
“These banks have a slight advantage because of this. However, they will need to work on localising the approaches according to Bank Negara’s requirements,” he said.
Meanwhile, Alliance Bank Malaysia Bhd, which had adopted the Basel II standardised approach in 2008, is building capabilities towards the more advanced Basel II IRB approach, which enables rating models to be developed to enhance its business decisions.
Group chief executive officer Datuk Bridget Lai said: “We are continuously enhancing our risk management capabilities and making preparations for the more sophisticated Basel II approaches.”
Some of the key challenges banks cited in adopting Basel II include the collection of data history for the development of IRB models, availability of skilled resources and sufficient investment in IT infrastructure to implement Basel II.
Nevertheless, Basel II, with its linkages between risk and capital, is expected to enhance the resilience of domestic banks.
http://biz.thestar.com.my/news/story.asp?file=/2009/8/17/business/4525770&sec=business
On track for advanced Basel II approaches
PETALING JAYA: The country’s banks are on track to adopt advanced Basel II approaches by January next year and a delay in the implementation is not expected.
John Lee, KPMG head of Asia Pacific financial risk management and head of Malaysia financial services, said many banks were at various degrees of Basel II projects, covering enhancements of risk management governance and framework, and ongoing improvements in risk assessment, measurement and mitigation.
“Basel II is a pivotal milestone to achieve better risk and capital management,” he said.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz had said Malaysian banks were well positioned for the advanced implementation of Basel II in 2010.
Most banks, which have chosen to comply with the less sophisticated approaches of Basel II Pillar 1, which focuses on minimum capital requirements, are already in compliance with Basel II since January 2008.
However, some of the country’s banks such as Malayan Banking Bhd, OCBC Bank (M) Bhd and United Overseas Bank (M) Bhd have chosen to skip the adoption of the standardised approach and move towards the advanced approaches such as the internal rating based (IRB) approach for credit risk, where compliance is by January 2010.
Lee said that besides the Basel II Pillar 1 requirements, all banks were also working towards complying with Basel II Pillar 2 which focused on banks’ internal capital management and Pillar 3 on disclosure of risk management and market discipline, where the deadline indicated by Bank Negara was the beginning of 2010 (for banks which have adopted the standardised approach).
“These banks are certainly occupied in preparing and ensuring that various critical milestones are fulfilled to meet the impending timeline,” he added.
Malayan Banking Bhd project director (Basel II) Ariffin Morad said the group had obtained Bank Negara’s conditional approval to adopt the IRB approach in 2010.
“Bank Negara is in the process of reviewing our preparations and we expect final IRB certification before we implement,” he said.
According to Ariffin, Maybank has also made preparations for Pillar 2 and Pillar 3, in line with regulatory requirements.
“We have submitted a high-level Internal Capital Adequacy Assessment Process framework to Bank Negara in 2008.
“We will implement IRB disclosure requirements as set out by Bank Negara for Pillar 3,” he said.
OCBC Bank (M) Bhd and OCBC Al-Amin Bank Bhd plan to be ready to adopt Basel II IRB for credit risk by the stipulated deadline pending the release of the finalised IRB rules by the central bank.
OCBC Bank country chief risk officer Choo Yee Kwan said: “We are currently on track to comply with Bank Negara’s IRB rules by January 2010.”
Pillar 2 for credit risk would follow a year after implementation of Pillar 1, he added.
“Although Pillar 3 for the credit risk timeline in the country has yet to be determined, OCBC, at group level, has included Pillar 3 market disclosure in its 2008 annual report,” he said.
United Overseas Bank (M) Bhd director and chief executive officer Chan Kok Seong said the bank was also currently preparing the necessary processes to implement the IRB approach for credit risk.
“Where reporting to the local authority is concerned, we still report under the Basel I regime and will need Bank Negara’s certification to migrate to the advanced approaches for credit risk.
“We are ready to adopt Basel II from 2010 onwards, subject to Bank Negara’s validation,” he said.
KPMG’s Lee noted that locally incorporated foreign banks, such as OCBC and UOB, had the necessary infrastructure to comply with the advanced approaches of Basel II as their parents, which are international banks, would have already adopted the approaches in other countries.
“These banks have a slight advantage because of this. However, they will need to work on localising the approaches according to Bank Negara’s requirements,” he said.
Meanwhile, Alliance Bank Malaysia Bhd, which had adopted the Basel II standardised approach in 2008, is building capabilities towards the more advanced Basel II IRB approach, which enables rating models to be developed to enhance its business decisions.
Group chief executive officer Datuk Bridget Lai said: “We are continuously enhancing our risk management capabilities and making preparations for the more sophisticated Basel II approaches.”
Some of the key challenges banks cited in adopting Basel II include the collection of data history for the development of IRB models, availability of skilled resources and sufficient investment in IT infrastructure to implement Basel II.
Nevertheless, Basel II, with its linkages between risk and capital, is expected to enhance the resilience of domestic banks.
http://biz.thestar.com.my/news/story.asp?file=/2009/8/17/business/4525770&sec=business
New rules to boost insurance
Monday August 17, 2009
Lifting of restriction on tie-ups to improve penetration rate, insurers’ revenues
PETALING JAYA: The lifting of the restriction on foreign insurers’ tie-ups with local banks is expected to improve the penetration rate of insurance, apart from boosting insurers’ revenues.
Before the liberalisation of the financial sector in April, foreign-owned insurers were only allowed to tie up with local banks to market bancassurance products.
Foreign insurance companies are now able to partner as many local and foreign banks that they want to sell insurance products. Life Insurance Association of Malaysia (Liam) president Md Adnan Md Zain said the measure would increase the distribution channels for life insurance as consumers could have access to a wider range of products. This augur well for the Malaysian public as the percentage of people with life insurance protection was still around 41%, he said in an interview with StarBiz.
With the restriction removed, Liam sees the bancassurance channel playing a more important role in distributing insurance, as foreign-owned insurers would now be more active in bancassurance.
“The traditional agency channel will remain an important distribution channel for insurance companies. Experience so far in Malaysia shows the bancassurance channel has its strength in distributing short to medium-term single premium products.
“For regular premium products, the agency distribution channel is still the dominant channel. This is due to the complexity of regular premium products which the agency channel currently has a relative advantage in terms of experience and knowledge over their bancassurance counterpart,’’ Adnan said.
For the life insurance industry, the bancassurance market share of total new business premium increased from 2% in 1994 to 42% in 2008.
Last year, the share of bancassurance in single premium products was 65% while in regular premium products it was 7%.
Bancassurance contributed RM2.47bil in single premiums and RM185mil in regular premiums in 2008. The corresponding figures for 2007 were RM3.17bil and RM130mil.
According to Adnan, the recent financial turmoil had affected the single premium business to an extent and, hence, the performance of bancassurance would be affected in the short term as well. However, with the liberalisation and the subsequent economic recovery, bancassurance was expected to grow positively in the medium to long term, he added.
As of June 30, there were 15 life insurance companies which had tie-ups with banking institutions. In the same period, a total of 7,375 bank staff selling life insurance were registered with Liam.
Great Eastern Life Assurance (M) Bhd collaborated last month with OCBC Bank to launch its first regular premium bancassurance product.
Before the liberalisation, Great Eastern was only involved in marketing credit life-related products through banks.
Great Eastern director and CEO Koh Yaw Hui said the new bancassurance partnership with OCBC would enable the company to market a full range of life insurance products through the bank. With this partnership, Great Eastern is expected to generate total new business premiums of about RM100mil by the year-end.
The tie-up would see bancassurance contributing 8% to 9% of the company’s total portfolio by year’s end, Koh said.
Lonpac Insurance Bhd adviser Tee Choon Yeow said the company would consider more tie-ups for bancassurance if the opportunities arose. Currently, Lonpac’s main partners for this business are Public Bank Group, United Overseas Bank (M) Bhd and EON Bank.
“The liberalisation will afford the insurers to have more outlets to reach their potential clients. With more than one financial institution in partnership, they will be able to design and market bancassurance products as well as provide the insurer greater opportunities to expand its market,’’ Tee said.
The company’s bancassurance premiums grew from 5% in 2005 to 10% as at June 30.
http://biz.thestar.com.my/news/story.asp?file=/2009/8/17/business/4490024&sec=business
Lifting of restriction on tie-ups to improve penetration rate, insurers’ revenues
PETALING JAYA: The lifting of the restriction on foreign insurers’ tie-ups with local banks is expected to improve the penetration rate of insurance, apart from boosting insurers’ revenues.
Before the liberalisation of the financial sector in April, foreign-owned insurers were only allowed to tie up with local banks to market bancassurance products.
Foreign insurance companies are now able to partner as many local and foreign banks that they want to sell insurance products. Life Insurance Association of Malaysia (Liam) president Md Adnan Md Zain said the measure would increase the distribution channels for life insurance as consumers could have access to a wider range of products. This augur well for the Malaysian public as the percentage of people with life insurance protection was still around 41%, he said in an interview with StarBiz.
With the restriction removed, Liam sees the bancassurance channel playing a more important role in distributing insurance, as foreign-owned insurers would now be more active in bancassurance.
“The traditional agency channel will remain an important distribution channel for insurance companies. Experience so far in Malaysia shows the bancassurance channel has its strength in distributing short to medium-term single premium products.
“For regular premium products, the agency distribution channel is still the dominant channel. This is due to the complexity of regular premium products which the agency channel currently has a relative advantage in terms of experience and knowledge over their bancassurance counterpart,’’ Adnan said.
For the life insurance industry, the bancassurance market share of total new business premium increased from 2% in 1994 to 42% in 2008.
Last year, the share of bancassurance in single premium products was 65% while in regular premium products it was 7%.
Bancassurance contributed RM2.47bil in single premiums and RM185mil in regular premiums in 2008. The corresponding figures for 2007 were RM3.17bil and RM130mil.
According to Adnan, the recent financial turmoil had affected the single premium business to an extent and, hence, the performance of bancassurance would be affected in the short term as well. However, with the liberalisation and the subsequent economic recovery, bancassurance was expected to grow positively in the medium to long term, he added.
As of June 30, there were 15 life insurance companies which had tie-ups with banking institutions. In the same period, a total of 7,375 bank staff selling life insurance were registered with Liam.
Great Eastern Life Assurance (M) Bhd collaborated last month with OCBC Bank to launch its first regular premium bancassurance product.
Before the liberalisation, Great Eastern was only involved in marketing credit life-related products through banks.
Great Eastern director and CEO Koh Yaw Hui said the new bancassurance partnership with OCBC would enable the company to market a full range of life insurance products through the bank. With this partnership, Great Eastern is expected to generate total new business premiums of about RM100mil by the year-end.
The tie-up would see bancassurance contributing 8% to 9% of the company’s total portfolio by year’s end, Koh said.
Lonpac Insurance Bhd adviser Tee Choon Yeow said the company would consider more tie-ups for bancassurance if the opportunities arose. Currently, Lonpac’s main partners for this business are Public Bank Group, United Overseas Bank (M) Bhd and EON Bank.
“The liberalisation will afford the insurers to have more outlets to reach their potential clients. With more than one financial institution in partnership, they will be able to design and market bancassurance products as well as provide the insurer greater opportunities to expand its market,’’ Tee said.
The company’s bancassurance premiums grew from 5% in 2005 to 10% as at June 30.
http://biz.thestar.com.my/news/story.asp?file=/2009/8/17/business/4490024&sec=business
Monday, July 13, 2009
RHB Bank continues to transform
Monday July 13, 2009
It wants to be well prepared for imminent economic recovery
PETALING JAYA: RHB Bank Bhd expects to sustain profitability and asset growth this year while raising the bar on service quality as the group continues to reap the benefits of its ongoing transformation exercise amid a challenging economic environment, said the bank’s new group managing director Datuk Tajuddin Atan.
Tajuddin aims to maintain the banking group’s record net profit achieved in financial year ended Dec 31, 2008, which exceeded RM1bil for the first time.
“To sustain at this level would be fantastic in view of the current challenging environment,” he said. “In that way, we would surely make heads turn.’’
He said his immediate priorities were to continue with the group’s five-year transformation programme which started in 2007.
“It is crucial to position ourselves well in order to be prepared for the imminient economic recovery,” Tajuddin told StarBiz.
“RHB already has a strong management team. As a mid-sized bank, it is agile and can respond fast to changes. It is matter of improving efficiency and further reducing costs.”
The various strategic business units have already been restructured and buzzing with activities based on their areas of focus, he said, adding that RHB has passed its first phase of improved efficiency and was now into its second phase of sustainability and higher performance.
Tajuddin succeeded Michael J. Barrett, the former group managing director, on July 1.
He was previously CEO and president of Bank Pembangunan Malaysia Bhd.
Prior to that, Tajuddin was general manager (CEO position) at Bank Simpanan Nasional from October 2004 to November 2007.
He spent his early years at the former Bank Bumiputra, where he served for 16 years, holding various positions such as group treasurer and assistant general manager (treasury) of its New York branch.
RHB plans to strengthen Islamic banking in both aspects of retail and investment banking, Tajuddin said, adding that his main priorities were to ensure that assets and liabilities were well managed, with loans growth targeted at 5% to 7% this year.
“If the business is fundamentally sound, we would look to restructure credit facilities to match cashflows affected by the difficult external environment.
“We have strengthened a clear credit framework and strengthened our collection as well as early tracking mechanism,” he said.
Tajuddin is also stressing on the need to set a high level of service quality at RHB.
“Customers nowadays are very choosy. It is not just about offering a whole range of products or services.
“Competition is the buzzword now. We blink and we would lose potential customers. If someone else blinks, we would get their customers. Not doing anything in the current environment is bad,” he said.
Tajuddin said he used the bank’s products and services himself and sometimes turned up unannounced at some of the bank’s branches as part of efforts to improve the quality of service.
“I need to experience it first-hand. If I find it difficult to use, how would our customers feel?” he asked.
RHB has been looking seriously into customer complaints and will embark on a re-training programme for over 3,000 staff in the areas of service and credit quality.
“We are a recognisable brand, with over 180 branches and a large customer base. But all this means nothing if the service quality is not improved,” he said.
Tajuddin also intends to further improve staff welfare by organising annual dinners, family and sports days.
“We want to get the families involved as we understand that a lot of family time has been sacrificed by our staff,” he said.
http://thestar.com.my/news/story.asp?file=/2009/7/13/business/4300440&sec=business
It wants to be well prepared for imminent economic recovery
PETALING JAYA: RHB Bank Bhd expects to sustain profitability and asset growth this year while raising the bar on service quality as the group continues to reap the benefits of its ongoing transformation exercise amid a challenging economic environment, said the bank’s new group managing director Datuk Tajuddin Atan.
Tajuddin aims to maintain the banking group’s record net profit achieved in financial year ended Dec 31, 2008, which exceeded RM1bil for the first time.
“To sustain at this level would be fantastic in view of the current challenging environment,” he said. “In that way, we would surely make heads turn.’’
He said his immediate priorities were to continue with the group’s five-year transformation programme which started in 2007.
“It is crucial to position ourselves well in order to be prepared for the imminient economic recovery,” Tajuddin told StarBiz.
“RHB already has a strong management team. As a mid-sized bank, it is agile and can respond fast to changes. It is matter of improving efficiency and further reducing costs.”
The various strategic business units have already been restructured and buzzing with activities based on their areas of focus, he said, adding that RHB has passed its first phase of improved efficiency and was now into its second phase of sustainability and higher performance.
Tajuddin succeeded Michael J. Barrett, the former group managing director, on July 1.
He was previously CEO and president of Bank Pembangunan Malaysia Bhd.
Prior to that, Tajuddin was general manager (CEO position) at Bank Simpanan Nasional from October 2004 to November 2007.
He spent his early years at the former Bank Bumiputra, where he served for 16 years, holding various positions such as group treasurer and assistant general manager (treasury) of its New York branch.
RHB plans to strengthen Islamic banking in both aspects of retail and investment banking, Tajuddin said, adding that his main priorities were to ensure that assets and liabilities were well managed, with loans growth targeted at 5% to 7% this year.
“If the business is fundamentally sound, we would look to restructure credit facilities to match cashflows affected by the difficult external environment.
“We have strengthened a clear credit framework and strengthened our collection as well as early tracking mechanism,” he said.
Tajuddin is also stressing on the need to set a high level of service quality at RHB.
“Customers nowadays are very choosy. It is not just about offering a whole range of products or services.
“Competition is the buzzword now. We blink and we would lose potential customers. If someone else blinks, we would get their customers. Not doing anything in the current environment is bad,” he said.
Tajuddin said he used the bank’s products and services himself and sometimes turned up unannounced at some of the bank’s branches as part of efforts to improve the quality of service.
“I need to experience it first-hand. If I find it difficult to use, how would our customers feel?” he asked.
RHB has been looking seriously into customer complaints and will embark on a re-training programme for over 3,000 staff in the areas of service and credit quality.
“We are a recognisable brand, with over 180 branches and a large customer base. But all this means nothing if the service quality is not improved,” he said.
Tajuddin also intends to further improve staff welfare by organising annual dinners, family and sports days.
“We want to get the families involved as we understand that a lot of family time has been sacrificed by our staff,” he said.
http://thestar.com.my/news/story.asp?file=/2009/7/13/business/4300440&sec=business
Saturday, July 11, 2009
Stronger growth seen for insurance
Saturday July 11, 2009
THE insurance industry is poised to show improvement in performance in the second half of the year on the back of the recovery in the country’s export sector.
THE insurance industry is poised to show improvement in performance in the second half of the year on the back of the recovery in the country’s export sector.
Many insurance players are optimistic the performance for the second half will be better than the first half of the year underpin by the pick-up in economic activities spurring stronger export growth.
Great Eastern Life Assurance (Malaysia) Bhd director and chief executive officer Koh Yaw Hui says: “All recent economic indicators suggest that the worst is over as the most affected export industry has been seen picking up and many companies have started recruiting.
“We expect the life insurance industry for the second half of the year to do much better than the first half. Personally, I think this year, the industry should end up having double-digit growth.”
The growth driver that will steer the industry in the second half according to general insurer LPI Capital Bhd chief executive officer Tee Choon Yeow will be the export and construction sectors.
The growth in the export industry, he adds, will help in the development of the marine and manufacturing sectors, which in turn will create greater demand for marine insurance as well as fire insurance.
Tee is also the advisor of Lonpac Insurance Bhd, the wholly-owned insurance arm of LPI Capital.
The construction industry can also be identified as a key potential growth driver that will help construction related insurance to continue to grow as long as the government continue to invest in infrastructure, Tee notes.
Manulife Holdings Bhd Group CEO Michael Chan says he is positive of the outlook for the insurance for the second half as insurance plays a very important role in one’s financial planning portfolio regardless of the economic cycles.
“Manulife’s insurance business showed strong growth in the second quarter as we launched new products and new agency performance management standards.
“We expect to see continued improvement in the second half as we roll out more new products, further drive the agency performance management standards and continue with our recruitment programmes,” Chan adds.
Koh says Great Eastern has done very well in the first half of the year registering more than RM360mil in total weighted new business premium, which was more than 50% growth compared with the similar period last year in line with economic improvement.
Riding on the momentum of its strong first half result, he adds the company should continue to do well in the second half and meet its goal of RM800mil in total weighted new business premium for this year.
Based on the company’s first six months results, Tee points out that Lonpac is still optimistic of meeting its target of 15% growth in gross premiums by year-end.
Despite operating in a competitive and challenging environment, it turned in an impressive underwriting surplus of RM35.5mil representing a significant jump of 55.7% over the corresponding period of 2008. It also recorded underwriting surplus in all classes of insurance for the period.
Improved performance
Tee attributed the improved performance to prudent underwriting which has help it achieve profit and premium growth year on year.
He stress for insurers to improve performance amid the tough economic environment, they need to also display a high degree of transparency, corporate governance and professionalism.
According to Bank Negara’s statistics, gross premiums for general insurance last year stood at RM9.73bil against RM9.07bil in 2007. Net premiums for the period was also higher at about RM9bil as oppose to RM8.2bil (in 2007).
The Life Insurance Association of Malaysia (LIAM), in releasing its latest figures, says the industry delivered a strong first quarter (January-March) performance with new business sales growing by 14% on weighted premium basis.
Weighted premium is calculated as 10% of single premium plus 100% of regular premium.
The growth, LIAM says, was contributed by a strong performance in regular premium sales which went up by 24% compared to the same period last year.
The growth, LIAM says, was contributed by a strong performance in regular premium sales which went up by 24% compared to the same period last year.
Single premium business, however, registered a decline of 43% due to the global financial crisis and the decline in interest rate.
By class of business, investment-linked business, normally perceived as savings related products, registered a sharp decline of 23% by weighted premium.
The sale of single premium investment-linked declined from RM584mil in the first quarter of 2008 to a mere RM48mil in the corresponding period in 2009.
Traditional business, normally perceived as protection related products, on the other hand registered a strong growth of 43% during the period as opposed to similar quarter last year.
The sales of group insurance business remained fairly static with total premium of RM652mil compared to RM653mil a year earlier, LIAM says.
Key growth drivers
Koh said the two key growth drivers for the industry for the second half will still be the distribution channel as well as products.
“For us, the second half of the year will be an exciting period. Apart from continuing with our strategy to further enhance the productivity and professionalism of our 17,000 agency force, we will be distributing our products through the bancassurance channel under the financial sector liberalisation plan.
“Great Eastern is now able to have bancassurance tie-up with all the banks including foreign banks in Malaysia and hope to sell its first policy within the next one to two months,” he adds.
As far as distribution channel is concern, Koh says bancassurance is set to grow faster after the liberalisation as there is now no restriction of insurance companies tying up with banks to enhance their sales.
On the possible and likely challenges for the industry, Tee says it is the increasing claim trends from motorists, especially on bodily injury as well as from motor theft.
“We believe that the most important step that needs to be taken to address these issues is to practice prudential underwriting and to have in place strong claims management and underwriting processes,” he adds.
Koh says one of the challenges is for agents to advise consumers on the importance of financial planning to meet their future goals since people tend to be very prudent in their spending during the current difficult times.
As such, it is important that agents are professional and have the required knowledge and competency to play that role, he explains.
Chan views the state of the economy as a challenge for the industry. “The positive news is that the Government has announced numerous stimulus plans to help drive economic growth but the pace of growth may be impacted by external factors among which is the recovery of our export markets.
“Also, equity markets have not stabilised and should they continue to be volatile, it will impact investment income for insurers,” Chan says.
http://thestar.com.my/news/story.asp?file=/2009/7/11/business/4282588&sec=business
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