AXA Considering Selling Singapore Operation

Axa SA is considering a sale of its Singapore business as it seeks to raise funds divesting peripheral operations. The French insurer is working with an advisor on the potential sale.

The Singapore unit, which offers life and property and casualty insurance, could draw interest from rivals seeking to expand in South-East Asia. It generated €615 million (RM3.08 billion) of revenue in 2019.

A sale process could start as soon as the next few weeks. No final decisions have been made, and there’s no certainty the deliberations will lead to a transaction.

Axa and a local partner are also considering a potential sale of their life and general insurance venture in Malaysia, which could fetch about US$650 million (RM2.73 billion).

Axa said this month that an agreement it struck to sell its Axa Life Europe business to Cinven Group Ltd, an international private-equity firm, had been terminated after certain conditions weren’t met.

CEO Thomas Buberl is trying to shift Axa’s focus on property and casualty insurance following its US$15.3 billion purchase of XL Group Ltd in 2018. Since then, the CEO has been reviewing options for smaller businesses across the world, including in the Middle East, to help pay for the XL deal.

Profit at Axa sank in the first half (1H) as it booked a €1.5 billion charge for claims related to Covid-19. Axa also warned of further shocks from the pandemic, scrapped growth targets and cancelled a payout to shareholders.

Dealmaking in the insurance industry has remained resilient amid a slowdown in broader mergers and acquisitions activity amid the coronavirus pandemic. Insurers have been involved in US$99 billion of acquisitions this year, up 77% from the same period in 2019.

Aviva Hints Pullout From Asia & Europe

Aviva's chief executive Amanda Blanc ended her first month in the job by hinting she could pull out of a number of overseas markets in a major shake-up of the insurer. In a move welcomed by investors, Blanc said the insurer would be focusing on its 'core operations' in the UK as well as in Ireland and Canada.

She suggested the company could pull out of its operations elsewhere, such as in Asia and continental Europe. Aviva, which has long been criticized for its sprawling business and a lack of strategic direction, has been under pressure for several years to slim down and clarify its focus.

AXA EUR1.5bn Covid-19 Claims

AXA has recorded EUR1.5bn ($1.78bn) in COVID-19 claims in the first half of this year, which is in line with its earlier forecasts.

“The impact of COVID-19 on AXA’s earnings was in line with our previously published guidance. Commercial lines were the most impacted, notably at AXA XL. The rest of the Group was resilient, with the impacts from COVID-19 claims largely offset by lower frequency in motor and growth in health and asset management,” said AXA CEO Thomas Buberl.

The Group also reported that its net income decreased by 39% to EUR1.4bn with adjusted earnings dropping 51% to EUR2bn, reflecting lower underlying earnings as well as higher impairments in the context of financial market volatility linked to COVID-19.

Its underlying earnings decreased by 48% to EUR 1.9bn mainly driven by: P&C (-72%) mostly due to the impact of Covid-19 related claims; and Life and Savings (-9%) primarily linked to the extension of disability coverage in the context of COVID-19 and the decrease in annuities discount rate.

In light of the estimated impact of COVID-19 on its earnings in 2020, AXA’s management has withdrawn its Ambition 2020 underlying earnings per share and adjusted return on equity targets, whilst maintaining its Solvency II ratio and free cash flow targets.

Adverse Selection On Insurance

Adverse selection is a financial term that means one party in a transaction has information that the other party doesn’t have. If you sell a car knowing the starter is faulty and neglect to disclose this information, the principle of adverse selection means you may get more money for the car than it’s worth. 

What does adverse selection insurance mean for the life insurance industry? Adverse selection’ means an insurer believes a policyholder is less risky than they really are. Adverse selection can be a problem for insurers who sell life, auto, health and other types of insurance.

What is adverse selection - Insurance companies determine your premium rate by looking at all the variables present in your application. The more likely it is that you’ll make a claim on your policy, the higher your premium.

With life insurance, even a small lie on your application can be considered adverse selection. If an applicant applies for a life insurance policy but don’t disclose that he is a smoker, he may be charged a lower, non-smoking rate. Smokers are more at risk of illness than the general population, he is receiving a lower rate than he would have gotten if he’d been honest on your application.

It may seem like a small thing, but giving incorrect information or leaving out important details, when one is purchasing a policy is never a good idea. If the insurer discovers that you completed your application fraudulently, they may have the legal right to deny payment to your beneficiaries.

Lying on your application may also cause the company to deny coverage if the lie is discovered. If you’re a smoker, for example, even if you neglect to mention it on your application, the company may find out the truth when they receive your physician’s statement later in the underwriting process. That lie is likely to make them wonder if insuring you is a good idea.

How adverse selection impacts the life insurance industry - Adverse selection life insurance may lead to insurers charging less for policies than they might otherwise. Your policy cost is determined by algorithms the underwriters access to determine the likelihood of your death while the policy is in force. If that risk is low, so is your premium.

But because of adverse selection, the industry has to account for the fact that some people will commit fraud or omit information from their applications that will result in low premiums but a higher risk of death. That means the company has to pay out on more claims.

To account for this, insurers pass that cost on to you, the policyholder, charging a little more for premiums to counter the increased claims they have to pay on accounts with undetected adverse selection. So, even if you are honest on your application, you may be paying for those who aren’t.

How insurance companies collect information - During the underwriting process, your insurer collects information in several ways, which serve as a check on each other to ensure accuracy. Those ways may include:

1: The initial application: You’ll be asked basic information on yourself, your health, your job and hobbies. Although you may get away with leaving something off the application, it could be discovered later in the process — and result in a denial of coverage.

2: Paramedical exam: The insurer sends a healthcare professional to your home or office to conduct an examination. Any inconsistencies in your application will be noted. For example, if you shaved twenty pounds off your weight on your app, the paramedical exam should catch it.

3: Doctor’s statement: If the underwriter has any questions about your health, they will ask your primary care physician for a statement. If, say, the paramedical exam resulted in a suspicion that you’re a smoker when you said you weren’t, the underwriter may question your doctor in detail about your smoking habits.

4: Prescription list: The underwriter can also access information on what drugs you currently take or have taken in the recent past. This may shed light on chronic illness or past disease that would increase your risk of dying.

5: Medical Information Bureau listing: This industry organization collects info that you’ve submitted on past applications for life, health, auto or other insurance. If it doesn’t line up with what you’ve said on the current application, it will raise suspicions.

6: Motor vehicle report: The underwriter will also pull a report on your driving activities from your state’s DMV. If you haven’t honestly recorded the fact that you are a high-risk driver or have serious violations on your record, it may work against you because it will be clear from the data the DMV collects on you.

All of this information presents the underwriter with a full picture of who you are and what sort of risk you would be to the insurer. The application is only the first of several ways that the company gathers information on you.

Misrepresentation - If, after all this, an untruth slips through the process, this is called misrepresentation. You may congratulate yourself on getting away with it, but don’t be so sure you have. If this information comes to light later on and the insurer can prove it was an intentional lie, you’ve committed fraud.

Contestable Period - Some life insurance policies have a two year period, called the contestable period, during which the policy can be canceled if misrepresentation comes to light. Even if the lie is caught after this period, your insurer may be reluctant to pay out on death benefits if your death is caused by something that you knew about but didn’t disclose in your application.

Conclusion - In the end, honesty is the best policy when applying for life insurance. Insurers have trained staff who are skilled at sniffing out lies and inconsistencies, and some even work with investigators to prove fraud after the fact. All your premium payments may come to nothing if a lie on your application results in denial of payment or reduced payment on your death.

OVO Indonesia Largest Integrated Digital Ecosystem

OVO has become more than just a payment platform, but Indonesia's largest integrated digital ecosystem as it enters its third year in September. The Lippo-backed startup first joined the e-money boom in 2017. OVO later expanded to other financial services, including peer-to-peer (P2P) lending, investment, insurance, credit scoring, and multifinance.

The app now offers P2P lending with Taralite which has recently secured license from the Financial Services Authority (OJK). Working with Bareksa - OVO users can invest in a mutual fund, government securities and gold. Corporate bonds and stocks will join the list in the near future.

OVO teamed up with insurance company Prudential to promote insurance inclusion. Those interested can fill the available form. A Prudential agent will then contact them for more details and paper works.

Almost 30 percent of OVO users are unbanked. They usually top up their OVO credits through Grab drivers, not bank transactions. These people did not have a bank account, but they are comfortable using OVO. 

Additionally, OVO aims to help micro, small and medium enterprises not only create a sustainable business, but also grow and adapt amid the pandemic. As of now, a whopping 550,000 out of the 600,000 OVO merchants are MSMEs. More initiatives to help out MSMEs will also be launched.

Pre-Employment Card - OVO actively helped the government in preparing the pre-employment card, an unemployment benefits program for laid off workers during the pandemic. The program offers online trainings for job seekers and a platform for social aid distribution. Beneficiaries will receive incentives up to Rp 3.55 million ($242.62) on their OVO account.

Social aid funds have always had issues with the intermediary. With a digital platform, people can easily register. Once they have fulfilled the requirements and considered eligible, the government can immediately top up their OVO account. The program recorded more than 10 million signups.

Grab Micro-Investing & Insurance

Most of the unit’s insurance was previously focused on Grab’s ecosystem, including drivers and merchants on its platform. But new products, like hospital coverage that will launch in Indonesia first to supplement the country’s national healthcare system, are targeted at consumers.

Grab’s new micro-investment solution will be accessible through Grab’s digital wallet. It allows users to invest as little as SGD $1 at a time into liquid fixed-income funds managed by Fullerton Fund Management and UOB Asset Management, with the potential to earn returns of about 1.8%. It will launch first in Singapore at the beginning of September.

While Grab Financial Group already offers working capital loans to drivers and financing for merchants on its platform, its new consumer credit products include PayLater, which allows users to pay for Grab services at the end of each month, and will first be available in Singapore and Malaysia.

The company is also offering consumer loans from third-party licensed banks and financial institutions with an application process. 

Generali To Acquire More Stake From MPHB

MPHB Capital Bhd has announced that it is seeking Bank Negara Malaysia's (BNM) green light to start talks with Generali Asia on the divestment of its 51% stake in MPI Generali.

MPHB Capital's wholly-owned subsidiary Multi-Purpose Capital Holdings Bhd (MPCHB) today submitted another application to the central bank for the approval in principle to commence and enter into negotiations with Generali Asia, which currently holds the remaining 49% stake in MPI Generali.

The latest application was made for approval to commence and enter into fresh negotiations with Generali Asia in relation to MPCHB's potential disposal of 21% stake in MPI Generali to Generali Asia.

Generali Asia is a subsidiary of Italian Generali Group that acquired the stake from MPHB Capital in 2015. Notably, Generali Asia's put option on its 49% interest in MPI will come into play in May next year, five years after the completion of Generali Asia's 49% stake acquisition in May 2015.