Sunday, March 30, 2025

Life Insurers Investment Returns Plummet

Investment returns for local life insurance companies plummet as a result of a recent sharp downturn in the Indonesian Stock Exchange (IDX) Composite index. Life insurers recorded returns of 1.6 trillion rupiah (US$96.6mil) in January, down 56% year-on-year (y-o-y), dragging their overall revenue down by 16.5% to 13.97 trillion rupiah.

2024 Result - Last year, investment returns of life insurers dropped 29% to 22.2 trillion rupiah as the IDX Composite index slid 2.65%. The main gauge of the Jakarta bourse has lost almost 13% of its value since the start of this year.

On Monday, it briefly dropped below 6,000 points, marking the lowest level this year, before recovering part of the day’s losses. On March 18, market turbulence triggered a 30-minute trading halt for the first since the coronavirus pandemic, after the index had lost over 5%.

Stocks are the second-largest asset class within life insurers’ investment portfolios, after government bonds. The companies have reduced the share of equities from 27% of their total investments in January 2024 to 24% this year, according to data from the Financial Services Authority.

At the same time, their allocation to government bonds increased from 34% to 38.5%.

The general insurance sector - meanwhile, with a preference for government bonds and mutual funds, has slashed its stock market exposure from 10.6% in January 2024 to just 4.1% in January this year.

This more conservative approach paid off at a time when Indonesia’s stock market index lagged behind many others, with general insurers’ investment returns rising 3.8% y-o-y to 682.5 billion rupiah.

Indonesian Life Insurance Association, said that life insurers followed a risk-managed long-term investment strategy, meaning short-term stock market fluctuations should not significantly disrupt overall performance.

However, the recent downturn served as a warning for insurers to strengthen risk management measures and adjust their portfolios, as a prolonged slump in the IDX Composite index could further erode returns from stocks and corporate bonds.

Analysts have noted that the downturn in the local stock market reflected a less optimistic outlook from global investment banks. In a March 7 report, Goldman Sachs downgraded its rating for Indonesia’s stock market from “overweight” to “market weight”, citing weaker corporate earnings and tighter banking system liquidity as key concerns.

Participating Life Insurance Policy In Decline

The growth of new participating life insurance business in Malaysia is expected to remain low in the foreseeable future, according to a Bank Negara Malaysia (BNM) survey. The longer-term decline in the volume of new participating life insurance policies has led to a persistent trend of underwriting losses. 

The persistent decline in participating life insurance funds could lead to unsustainable economies of scale for some insurers, and expense pooling to an unsustainable level.

A participating life insurance policy - is a type of insurance product that allows policyholders to have a share of profits of the insurance fund in addition to receiving guaranteed benefits upon claims for insured events such as death or total and permanent disability. The policy also typically includes a savings element, where policyholders expect to receive maturity payouts upon termination or at the end of the policy term.

The share of participating policies has declined to 19% of the industry’s total net premiums over 2016-2023 from 39% in 2005-2015, according to BNM’s data.

The trend mirrors some markets in Asia and Europe, where prolonged low interest rates pressured on investment returns amid stricter regulatory requirements, including changes to risk-based capital frameworks and the availability of more attractive alternative policy offerings.

Despite the losses, the financial impact on the insurance sector remains limited as the sector continues to record positive net underwriting performance driven by other life insurance policies.

Total new business premiums, including savings-based policies, have continued to grow supported by the sustained growth in alternative policies amid a shift from participating policies to investment-linked and non-participating policies.

Still, BNM insisted that insurers observe specific requirements for managing the small and shrinking participating life insurance funds to preserve the funds and safeguard policyholders’ interests.

These include requirements for insurers to take appropriate remedial or mitigation actions to address risks emanating from the decline of participating life insurance funds.

China Anti-Corruption Net President Of China Life

Yang Chao, who formerly held the positions of president and party secretary at China Life Insurance Co, is under investigation for suspected violations of Party discipline and state law, according to China’s Central Commission for Discipline Inspection (CCDI).

The probe into Yang, announced through an official CCDI statement adds to a growing list of compliance-related investigations into figures in China’s state-owned financial institutions. The CCDI did not provide additional information about the nature of the suspected violations, nor was a timeline offered for the inquiry’s conclusion. No public comments have been made by China Life Insurance as of this publication.

Yang’s investigation comes as China continues a broad anti-corruption campaign, with particular focus on the financial services industry. Financial, energy, and sports sectors have been identified as priority areas for scrutiny under ongoing regulatory efforts to reinforce internal controls and governance.

Earlier this year, during a three-day plenary session of the CCDI held in Beijing, senior Chinese leaders said the Party was committed to tackling corruption. According to a summary of that meeting, the commission reviewed disciplinary and supervisory actions taken in 2024 and set goals for 2025.

The session included remarks by Xi Jinping, General Secretary of the Communist Party of China, who emphasized the importance of continued vigilance. In 2024, enforcement actions targeted practices such as excessive spending and bureaucratic inefficiency, while investigations into new forms of corruption were launched across key sectors.

The CCDI reported that 68 Party and government departments underwent regular inspections last year.

The commission has indicated that in 2025 it will focus more heavily on preventing and uncovering less visible forms of misconduct, such as abuse of authority for personal gain by public officials or their family members involved in private business.

Mechanisms for early detection and tighter supervision are expected to play a larger role in upcoming enforcement strategies. 

The CCDI’s communique also noted a need to address practices that distort competition or increase compliance burdens at the local level. Anti-corruption work is expected to be closely integrated with the country’s modernisation goals, aligning governance reforms with economic development priorities.

45.5% Malaysian Have One Life Insurance Policy

The insurance and takaful sector are crucial in protecting individuals and businesses against a variety of unforeseen risks and contributes to advancing an inclusive, resilient society. In 2024, 45.5 per cent of Malaysians have at least one life insurance or family takaful policy, an increase from prepandemic levels of 41.5 per cent in 2019.

Life insurance and family takaful policies typically see higher uptake in urban areas like Kuala Lumpur and Penang, in tandem with greater awareness on the importance of protection. Throughout 2024, there were over 530,000 subscriptions of microinsurance and microtakaful products under the Perlindungan Tenang (PT) framework.

Since the launch of the revised PT policy document17 and the implementation of the PT voucher program in 2021, its cumulative take-up has grown significantly and currently stands at 4.9 million subscriptions. This is roughly 49 times the take-up rate since the launch of the PT framework in 2017 up to 2021.

A total of RM17 million in claims was paid out in 2024, showing an increase of 20 per cent compared to 2023.These claims payouts were against unexpected and adverse life events like deaths, personal accidents and critical illnesses.

As announced in the Budget 2025, the PT voucher program will provide financial assistance of RM30 to Sumbangan Tunai Rahmah recipients to purchase or renew PT products.

Beyond PT, the government also extended the mySalam scheme for two more years until the end of 2025. This extension will allow vulnerable groups to continue benefitting from affordable takaful protection while encouraging the take-up of PT products to maintain protection in the future.

Self Declared Bankruptcy On the Rise

There is a growing trend among Malaysians to voluntarily declare themselves as bankrupt, according to insolvency department. Self-declared bankruptcy cases surged by 200% last year with 330 cases recorded, compared with 181 in 2023 and 116 in 2022.

This is a sign that many people are struggling with severe financial difficulties. There is a rise in individuals declaring bankruptcy because they feel they cannot repay their debts. Some borrowers may also choose this route to reduce their financial burden. For instance, if their monthly debt repayment is RM2,000, they might expect it to drop to just RM200 after being declared bankrupt.

In recent years, more people have opted to declare themselves bankrupt through a debtor’s petition, a legal process filed in court to protect themselves from excessive creditor claims.

The department is taking this rising trend seriously and is reviewing the debtor’s petition process to prevent potential misuse, as it does not have a set debt threshold.

With a debtor’s petition, an individual can apply for a court order to declare bankruptcy without any minimum debt threshold. They simply need to complete the required documents and pay a deposit. In contrast, a creditor’s petition only applies when the debt exceeds RM100,000, allowing creditors to initiate bankruptcy proceedings. 

He also cautioned that the Second Chance Policy, introduced by the government to help individuals regain financial stability, could be exploited if self-declared bankruptcies continue unchecked. Some individuals may take advantage of the system. They could file a debtor’s petition, declare bankruptcy, and then, knowing they can be discharged within three years by making minimal payments, use the Second Chance Policy to clear their status.

The Second Chance Policy is an initiative by the unity government to help individuals with small-scale debts to secure a bankruptcy discharge under specific conditions. 176,851 bankruptcy discharges were granted under this policy between March 2023 and December 2024, surpassing the initial target of 130,000 cases.

The department is now working on extending the Second Chance Policy to bankrupt companies. We are identifying eligible businesses to be included in the initiative. Previously, Prime Minister Anwar Ibrahim announced that the government would expand the Second Chance Policy to assist bankrupt companies in recovering from financial distress.

Friday, March 28, 2025

Malaysian Insurer - Lower Profit

The profitability of life insurance and family takaful funds plunged in the second half of 2024 (H2 2024), dropping to RM4.1 billion from RM8.4 billion in the first half of the year. In its Financial Stability Review for H2 2024, the central bank attributed the decline to weaker investment performance and higher underwriting losses, largely driven by surging medical claim payouts.

Medical payouts surged to RM6.2 billion in H2 2024, up from RM5.3 billion in both H1 2024 and H2 2023.

BNM attributed the increase in medical payouts to higher medical treatment costs and utilisation rates, particularly for chronic and acute conditions, “which led to premiums for medical and health insurance/takaful (MHIT) policies/certificates being adjusted upwards to ensure the sustainability of long-term coverage”.

To ease the burden on policyholders, the industry has introduced a staggered premium hike over at least three years from 2024 to next year.

However, BNM warned that the combination of rising medical costs, growing claims and the continued decline in participating life insurance policies could further strain net underwriting income.

Sunday, March 23, 2025

Malaysia Pump And Dump Investment

Five Malaysians have been charged in the United States for their alleged involvement in a US$214 million (RM950 million) “pump-and-dump” investment fraud scheme.

The accused Malaysians allegedly manipulated stock prices for profit. The misleading promotion and coordinated trading caused the stock price to artificially rise, at which point the defendants sold thousands of shares and made millions of dollars in profits.

A “pump-and-dump” scheme involves artificially inflating a stock’s price through misleading promotions before selling off shares at a profit, leaving other investors with losses. The fraudulent scheme allegedly involved individuals in China posing as US-based investment advisors to deceive investors into buying shares of China Liberal Education Holdings, Ltd.

If convicted, the accused could face up to 25 years in prison for each securities fraud charge and up to 20 years for each wire fraud charge.