Malaysia Life Insurance Growth Rate 1.8%

Despite the challenging business climate, public-listed insurers generally appear to be bucking the trend and are poised to see an improvement in earnings in the coming quarters after having charted sturdy growth in earnings in the final quarter of last year.

Some analysts and industry observers told StarBiz that they expected the net earned income/premiums and claims ratio to improve this year, although this scenario might come under pressure if the economy slowed down due to external headwinds and geopolitical woes.

 

Under the recalibrated Budget 2016, the country’s gross domestic product (GDP) growth had been revised to a narrower range of 4%-4.5% for this year. Last year, GDP stood at 5% as opposed to 6% in 2014.

 

The general insurance industry achieved 2.3% growth last year, with gross written premiums of RM17.49bil, which was a slower rate compared to the 5.9% growth achieved in 2014, the General Insurance Association of Malaysia said.

 

For the life insurance industry, new business total premium grew 1.8% in 2015 with total premium volume recording RM9.12bil, the Life Assurance Association of Malaysia said. The growth of new life business total premiums was lower than that of 9.3% achieved in 2014. The insurance sector’s performance is closely related to the country’s economic strength.

 

MIDF Research analyst Hafiz Hassan, who is maintaining a positive stance on the sector, said earnings were expected to continue improving in the coming quarters at a reasonable growth pace on growth prospects in net earned income and stable claims ratio.

 

Total takaful earned contributions grew steadily by 5.8% y-o-y to RM8bil in CY15 and was mainly contributed by strong growth in the general takaful income of RM1.7bil (13.9% y-o-y), while net earned contribution income for combined general and life insurance grew by 3.3%.

 

Commenting on the outlook for the sector, RHB Research expected this year to be another challenging year in view of the soft macroeconomic environment, which might likely impact the corporate and retail segments. Competition was also stiff in the corporate segment, with both conventional and takaful players eyeing a slice of the pie.

 

Takaful operators were in a better position to weather the storm and record above-industry growth.

“While part of the stronger growth for the industry is due to the low base effect, we believe there are also ongoing structural changes taking shape in the sector that would continue to benefit the takaful operators, namely, the switch to Islamic insurance products from conventional ones.

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