Insurance companies brace for global crisis

INSURANCE companies are strengthening their capabilities and adopting a prudent investment strategy to cushion the impact of the global financial turmoil.

Although the financial crisis has not hit the local insurance industry, insurers are not taking any chances in the event the crisis prolongs and begins to dent bottomline.

Allianz Malaysia Bhd (AMB), among others, is tapping on the group’s worldwide best practices to face the financial tsunami rocking credit markets.

Chief executive officer (CEO) Alexander Ankel said: “As part of an international group, AMB has access to numerous best global practices. These include underwriting, claims, investment, information technology and all other relevant operational processes, hence our risk management environment is very strong.

“This puts us in a position to master downward cycles and trends and to ensure we will continue to meet and exceed the expectations of agents, customers, distribution partners and business partners.”

According to Ankel, AMB also hopes to streamline both its general and life businesses within the next 20 months to further beef up its capabilities and competency.

This, he said, would create a more customer-centric organisation and help to convey the group’s best practice to the local market.

AMB, via subsidiary Allianz General Insurance Co (M) Bhd (AGIC), is now the country’s second largest general insurer with a market share of close to 10% after its consolidation with Commerce Assurance Bhd (CAB) last year.

Despite the challenging market environment, AGIC’s gross written premiums grew 33.2% to RM748.6mil in 2007 from RM561.9mil in 2006. Its life insurance operations, through subsidiary Allianz Life Insurance Malaysia Bhd, charted a 20.6% growth in written premiums to RM594.6mil last year.

AMB reported a group net loss of RM2.61mil last year mainly due to exceptional expenses and costs relating to the acquisition of CAB as compared with a net profit of about RM35mil in 2006.

The group currently has more than 9,000 agents (general and life), over 30 general insurance and 18 life insurance branches.

Manulife Insurance (M) Bhd president and CEO Peter Robertson said the key to cushion the impact of the credit crunch in the financial services sector was to have a good risk management system and practices.

“Our risk management practices cover three key areas: product design, investment management and asset liability management. For product design, we rigorously assess the pricing basis and the cost of any guarantees before launching products.

“Investment management pertains to the way we review credit and asset liability management is the combination of the above two practices,’’ he said.

Manulife’s new business premiums last year stood at RM71.3mil against RM50.2mil in 2006. Its net profit for the second quarter stood at RM30.5mil.

Last year, the company posted a net profit of RM85mil compared with RM50.7mil previously. Its total agency count as at September this year stood at 1,438.

Ankel said AMB has adopted a prudent investment strategy backed by well defined investment mandates, guidelines and limits in view of the current financial crisis.

The credit crunch had minimal impact on the company as its exposure in the local stock market had been reduced substantially and its foreign investment was only limited to its unit linked funds, Ankel noted.

Manulife, Robertson said, maintained very strict credit criteria for evaluating investments be it fixed income or equities. “In times like these the benefits of such conservatism comes to the fore.”

Hong Leong Assurance Bhd (HLA) group managing director and CEO Charlie E. Oropeza said the company’s investments were mainly in the local markets and did not have exposure to collateralised debt obligations and other exotic instruments.

Oropeza added HLA’s investments were well diversified and exposure to the equity market had been kept to a minimum and in sound dividend-yielding stocks.
Source from: The Star, 20 October 2008, By DALJIT DHESI

Posted in: companies, global crisis, Insurance