Malaysia Insurance Report Q3 2012

Includes 3 FREE quarterly updates

The Malaysia Insurance Report considers the prospects for both life and non-life insurers in that country.

The latest data from Bank Negara Malaysia (BNM), and the insurers themselves, indicates that overall premiums grew at respectable, but single-digit, rates in 2011. Interestingly, the central bank’s data suggests that growth in both family and general takaful contributions, which had been surging at annual rates of over 20% for years, has slowed quite markedly.

As BMI’s recent reports on Malaysia’s insurance sector have indicated, it is one in which the excitement often exceeds the reality. Deal-making in the last year or so has been driven to a significant extent by the desire of local corporate interests (typically financial holding companies) to reduce their exposure to the sector through sales to foreign multi-nationals. This says to us that the local protagonists have taken the view that, in a crowded market which is not expanding particularly quickly, their insurance subsidiaries/affiliates are worth more under the stewardship of foreign companies which have the advantages of regional scale and greater access to the capital that is needed. Meanwhile, it is not at all clear to us what will be the catalyst for a meaningful increase in non-life penetration over the forecast period.

It is easy to identify other markets in South East Asia (and the broader Asia-Pacific) region that are much larger, have vastly greater growth potential and/or where competitive pressures are much less.

Nevertheless, we stress that there are many strengths. The extensive participation of foreign companies in both the non-life and the life segments means that Malaysia has access to world-class practices and expertise. BNM is an effective regulator and promoter of financial services. It is also a key protagonist in the development of Islamic finance worldwide.

The latest results published by major insurers in relation to Q112 and 2011 support BMI’s long-standing view that the life segment is more dynamic and exciting than the non-life segment. Particular companies are achieving strong growth – particularly in terms of new business written through certain channels or involving specific products. Innovative products are being developed. Agency productivity is being boosted. New bancassurance deals are being signed. Family takaful accounts for around 15% of premiums – a sizeable portion even by the standards of countries where Islamic finance is well established. However, it is far from clear that growth in the number of users of life insurance – or in density (ie: premiums per capita) will support more than single-digit growth in the segment.

Over the last quarter, BMI has made the following changes:

Many of the leading insurance companies have published details of their operations, both in Malaysia and across the Asia Pacific region, in relation to Q112 or 2011. The details have been incorporated into the analysis.

The analysis includes the final figures for premiums, written by conventional insurers and takaful operators in 2011, that have been published by BNM.

The analysis takes into account BMI’s latest assessment of the economic environment in Malaysia.